Related papers: Decreasing Impatience
This paper assumes each individual in society has a random discount factor and assesses an intertemporal project using rank-dependent expected utility theory. We consider both the ex ante and the ex post approaches. For the former, we show…
People often deviate from expected utility theory when making risky and intertemporal choices. While the effects of probabilistic risk and time delay have been extensively studied in isolation, their interplay and underlying theoretical…
We study the interaction between strategy, heterogeneity and growth in a two-agent model of capital accumulation. Preferences are represented by recursive utility functions with decreasing marginal impatience. The stationary equilibria of…
I model a rational agent who experiences endogenous deadline pressure in the face of a fixed future deadline. The agent holds a resource stock, and opportunities to spend resources arise randomly according to a Poisson process. When the…
By embedding uncertainty into time, we obtain a conjoint axiomatic characterization of both Exponential Discounting and Subjective Expected Utility that accommodates arbitrary state and outcome spaces. In doing so, we provide a novel and…
This paper investigates a novel behavioral feature of recursive preferences: aversion to risks that persist over time, or simply \textit{correlation aversion}. Greater persistence provides information about future consumption but reduces…
How much should you receive in a week to be indifferent to \$ 100 in six months? Note that the indifference requires a rule to ensure the similarity between early and late payments. Assuming that rational individuals have low accuracy, then…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
We introduce the logistic model of consumption growth, which captures a negative feedback loop preventing an unlimited growth of consumption due to finite biophysical resources of our planet. This simple dynamic model allows for derivation…
According to conventional wisdom, ambiguity accelerates optimal timing by decreasing the value of waiting in comparison with the unambiguous benchmark case. We study this mechanism in a multidimensional setting and show that in a…
The conventional formal tool to detect effects of the financial persistence is in terms of the Hurst exponent. A typical corresponding result is that its value comes out close to 0.5, as characteristic for geometric Brownian motion, with at…
We revisit the problem of fairly allocating a sequence of time slots when agents may have different levels of patience (Mackenzie and Komornik 2023). For each number of agents, we provide a lower threshold and an upper threshold on the…
A forward-looking agent observes signals of a state that follows a Gaussian AR(1) process. He balances the cost of having imprecise beliefs with the cost of acquiring more precise signals. I characterize his optimal information acquisition…
We explore the effect of discounting and experimentation in a simple model of interacting adaptive agents. Agents belong to either of two types and each has to decide whether to participate a game or not, the game being profitable when…
Response times contain information about economically relevant but unobserved variables like willingness to pay, preference intensity, quality, or happiness. We provide a general characterization of the properties of latent variables that…
Behavior of systems that are functions of anticipated behavior of other systems, whose own behavior is also anticipatory but homeostatic and determined by hierarchical ordering, which changes over time, of sets of possible environments that…
This paper derives a novel representation of the exponential discounting model that allows one to assess departures from the model via a measure of efficiency. The approach uses a revealed preference methodology that does not make any…
Empirical evidence shows that wealthy households have substantially higher saving rates and markedly lower marginal propensity to consume (MPC) than other groups. Existing theory cannot account for this pattern unless under restrictive…
This paper characterizes differentiable subgame perfect equilibria in a continuous time intertemporal decision optimization problem with non-constant discounting. The equilibrium equation takes two different forms, one of which is…
This paper reveals a trap for artificial general intelligence (AGI) theorists who use economists' standard method of discounting. This trap is implicitly and falsely assuming that a rational AGI would have time-consistent preferences. An…