A General Theory of Time Preferences

Abstract

The main result of this paper is a representation theorem for time preferences (on the prize-time space) that cover a variety of time preference models considered in the experimental and theoretical literature on intertemporal choice. In particular, along with many models induced by similarity relations on time and outcomes, exponential, quasi-hyperbolic, hyperbolic, subadditive, and intransitive time preference models are special cases of this representation. One major advantage of this result is, therefore, to identify certain factors that are common to seemingly very different time preference structures, and provide a tractable mathematical format that allows for investigating certain economic environments without subscribing to a particular time preference model. To illustrate, we study the possibility of dynamically consistent decision making with the general class of time preferences we derive axiomatically here, and show that many economic problems (such as preemptive investment timing models and sequential bargaining games) can be analyzed in a unified manner with this class. JEL Classification: D11, D90

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