The intrinsic comparative dynamics of infinite horizon optimal control problems with a time-varying discount rate and time-distance discounting

    Authors

    M. R. Caputo

    Comments

    Authors: contact us about adding a copy of your work at STARS@ucf.edu

    Abbreviated Journal Title

    J. Econ. Dyn. Control

    Keywords

    Comparative dynamics; Optimal control; Precommitment solution; Sophisticated solution; Time-distance discounting; Time inconsistency; Time-varying discount rate; INTERTEMPORAL CHOICE; INCONSISTENCY; ANOMALIES; Economics

    Abstract

    The intrinsic comparative dynamics of a ubiquitous class of optimal control problems with a time-varying discount rate and time-distance discounting are derived and shown to be characterized by a positive semidefinite matrix. It is also shown that the said comparative dynamics are invariant to the functional form of the discount rate function and the type of agent. Consequently, if one limits econometric testing to the basic comparative dynamics of the given class of control problems, one cannot determine (i) the functional form of the discount rate function used by an agent, and thus if an agent is a time-consistent or time-inconsistent decision maker, or (ii) if an agent commits to a plan of action or takes into account the changing nature of his preferences when choosing a plan. (c) 2012 Elsevier B.V. All rights reserved.

    Journal Title

    Journal of Economic Dynamics & Control

    Volume

    37

    Issue/Number

    4

    Publication Date

    1-1-2013

    Document Type

    Article

    Language

    English

    First Page

    810

    Last Page

    820

    WOS Identifier

    WOS:000315061600006

    ISSN

    0165-1889

    Share

    COinS