Intertemporal Choice and Consumption Mobility

Intertemporal Choice and Consumption Mobility

The theory of intertemporal consumption choice makes sharp predictions about the evolution of the entire distribution of household consumption, not just about its conditional mean. In the paper, we study the empirical transition matrix of consumption using a panel drawn from the Bank of Italy Survey of Household Income and Wealth. We estimate the parameters that minimize the distance between th...

Intertemporal Choice

Optimal Consumption Choice under Uncertainty with Intertemporal Substitution†

We extend the analysis of the intertemporal utilitymaximization problem for HindyHuang-Kreps utilities reported in Bank and Riedel (1998) to the stochastic case. Existence and uniqueness of optimal consumption plans are established under arbitrary convex portfolio constraints, including the cases of both complete and incomplete markets. For the complete market setting, Kuhn-Tucker-like necessar...

Intertemporal Choice and Inequality

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Psychological connectedness and intertemporal choice.

People tend to attach less value to a good if they know a delay will occur before they obtain it. For example, people value receiving $100 tomorrow more than receiving $100 in 10 years. We explored one reason for this tendency (due to Parfit, 1984): In terms of psychological properties, such as beliefs, values, and goals, the decision maker is more closely linked to the person (his or her futur...