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Consumption–Savings Decisions with Quasi–Geometric Discounting
Author(s) -
Krusell Per,
Smith, Jr. Anthony A.
Publication year - 2003
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.1111/1468-0262.00400
Subject(s) - citation , consumption (sociology) , library science , discounting , operations research , economics , sociology , computer science , social science , mathematics , finance
How do individuals with time-inconsistent preferences make consumption-savings decisions? We try to answer this question by consideringthe simplest possible form of consumption-savings problem,assuming that discounting is quasi-geometric. A solution to the decisionproblem is then a subgame-perfect equilibrium of a dynamicgame between the individual's #successive selves". When the timehorizon is #nite, our question has a well-de#ned answer in terms ofprimitives. When the time horizon is...