On the time consistency of collective preferences
Optimization and Control
2018-07-18 v3 Economics
Abstract
A dynamic model of collective consumption and saving decisions made by a finite number of agents with constant but different discount rates is developed. Collective utility is a weighted sum of individual utilities with time-varying utility weights. Under standard separability assumptions, it is shown that collective preferences may be nonstationary but still satisfy time consistency. The assumption of time-varying weights is key to balance the need of the group for a changing distribution of consumption among its members over time with their tolerance for consumption fluctuations.
Cite
@article{arxiv.1607.02688,
title = {On the time consistency of collective preferences},
author = {Luis A. Alcala},
journal= {arXiv preprint arXiv:1607.02688},
year = {2018}
}
Comments
33 pages; changes in notation and major corrections