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Time Discounting and Time Preference: A Critical Review
 JOURNAL OF ECONOMIC LITERATURE
, 2002
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Intertemporally dependent preferences and the volatility of consumption and wealth
 Review of Financial Studies
, 1989
"... In this article we construct a model in which a consumer’s utility depends on the consumption history We describe a general equilibrium framework similar to Cox, Ingersoll, and Ross (1985a). A simple example is then solved in closedform in this general equilibrium setting to rationalize the observed ..."
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Cited by 167 (3 self)
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In this article we construct a model in which a consumer’s utility depends on the consumption history We describe a general equilibrium framework similar to Cox, Ingersoll, and Ross (1985a). A simple example is then solved in closedform in this general equilibrium setting to rationalize the observed stickiness of the consumption series relative to the fluctuations in stock market wealth. The sample paths of consumption generated from this model imply lower variability in consumption growth rates compared to those generated by models with separable utilizations. We then present a partial equilibrium model similar to Merton (1969, 1971) and extend Merton’s results on optimal consumption and portfolio rules to accommodate nonseparability in preferences. Asset pricing implications of our framework are briefly explored. The idea that a given bundle of consumption goods will provide the same level of satisfaction at any date regardless of one’s past consumption experience is implicit in models that use timeseparable utility functions to represent preferences. Separable utility functions have been the mainstay in much of the literature on asset pricing and optimal consumption and portfolio The results reported in this article were first presented at the EFA meetings in Bern, Switzerland, in 1985 [see Sundaresan (1984)]. Subsequently the article was presented at a number of universities and conferences. I thank the participants at those presentations for their feedback. I am especially thankful to Doug Breeden, Michael Brennan, John Cox, Chifu Huang, and Krishna Ramaswamy for their thoughtful comments and criticisms. I also thank Tongsheng Sun for explaining the simulation procedure for stochastic differential equations and for his comments and suggestions. I am responsible for any remaining errors. Correspondence should be sent to Suresh M. Sundaresan, Graduate
Preferences for sequences of outcomes
 Psychological Review
, 1993
"... Existing models of intertemporal choice normally assume that people are impatient, preferring valuable outcomes sooner rather than later, and that preferences satisfy the formal condition of independence, or separability, which states that the value of a sequence of outcomes equals the sum of the va ..."
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Cited by 94 (4 self)
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Existing models of intertemporal choice normally assume that people are impatient, preferring valuable outcomes sooner rather than later, and that preferences satisfy the formal condition of independence, or separability, which states that the value of a sequence of outcomes equals the sum of the values of its component parts. The authors present empirical results that show both of these assumptions to be false when choices are framed as being between explicitly denned sequences of outcomes. Without a proper sequential context, people may discount isolated outcomes in the conventional manner, but when the sequence context is highlighted, they claim to prefer utility levels that improve over time. The observed violations of additive separability follow, at least in part, from a desire to spread good outcomes evenly over time. Decisions of importance have delayed consequences. The choice of education, work, spending and saving, exercise, diet, as well as the timing of life events, such as schooling, marriage, and childbearing, all produce costs and benefits that endure over time. Therefore, it is not surprising that the problem of choosing between temporally distributed outcomes has at
Time Discounting: A critical review
 Journal of Economic Literature
, 2002
"... sds.hss.cmu.edu/faculty/loewenstein.html; and www.people.cornell.edu/pages/edo1/. ..."
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Cited by 21 (1 self)
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sds.hss.cmu.edu/faculty/loewenstein.html; and www.people.cornell.edu/pages/edo1/.
An Equilibrium Model of Wealth Distribution
 Journal of Monetary Economics
, 2007
"... I present an explicitly solved equilibrium model for the distribution of wealth and income in an incompletemarkets economy. I first propose a selfinsurance model with an intertemporally dependent preference (Uzawa (1968), Lucas and Stokey (1984), and Obstfeld (1990)). I then derive an analytical ..."
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Cited by 8 (0 self)
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I present an explicitly solved equilibrium model for the distribution of wealth and income in an incompletemarkets economy. I first propose a selfinsurance model with an intertemporally dependent preference (Uzawa (1968), Lucas and Stokey (1984), and Obstfeld (1990)). I then derive an analytical consumption rule which captures stochastic precautionary saving motive and generates stationary wealth accumulation. Finally, I provide a complete characterization for the equilibrium crosssectional distribution of wealth and income in closed form by developing a recursive formulation for the moments of the distribution of wealth and income. Using this recursive formulation, I show that income persistence and the degree of wealth mean reversion are the main determinants of wealthincome correlation and relative dispersions of wealth to income, such as skewness and kurtosis ratios between wealth and income.
Discounting and altruism to future decisionmakers
, 2002
"... Can a generation’s discounting of future generations’ consumption utilities be interpreted as “pure” altruism towards future generations, that is, a concern that these are better off according to their likewise forwardlooking preferences? It turns out that the answer is positive for many but not al ..."
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Cited by 5 (0 self)
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Can a generation’s discounting of future generations’ consumption utilities be interpreted as “pure” altruism towards future generations, that is, a concern that these are better off according to their likewise forwardlooking preferences? It turns out that the answer is positive for many but not all discount functions used in the economics literature. In particular, traditional exponential discounting is consistent with altruism towards the next generation, and “hyperbolic” discounting of the form used by Phelps and Pollak (1968) and Laibson (1997) is consistent with altruism to all future generations. Moregenerally,weprovideonesufficient and one necessary condition for a discount function to be consistent with altruism, and we establish a recursive functional equation which defines a onetoone mapping between discounting and altruism.