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Non-constant discounting and consumption, portfolio and life insurance rules

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  • Marín-Solano, Jesús
  • Navas, Jorge
  • Roch, Oriol

Abstract

Consumption, portfolio and life insurance rules are studied for an investor with an arbitrary but known distribution of lifetime with time-inconsistent preferences. Solutions are found for naive and sophisticated agents for the family of CARA and CRRA utility functions. Effects of non-constant discounting are illustrated numerically.

Suggested Citation

  • Marín-Solano, Jesús & Navas, Jorge & Roch, Oriol, 2013. "Non-constant discounting and consumption, portfolio and life insurance rules," Economics Letters, Elsevier, vol. 119(2), pages 186-190.
    • Handle: RePEc:eee:ecolet:v:119:y:2013:i:2:p:186-190
    DOI: 10.1016/j.econlet.2013.02.023
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    References listed on IDEAS

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    1. Karp, Larry, 2007. "Non-constant discounting in continuous time," Journal of Economic Theory, Elsevier, vol. 132(1), pages 557-568, January.
    2. Harris, Christopher & Laibson, David, 2001. "Dynamic Choices of Hyperbolic Consumers," Econometrica, Econometric Society, vol. 69(4), pages 935-957, July.
    3. Marín-Solano, Jesús & Navas, Jorge, 2010. "Consumption and portfolio rules for time-inconsistent investors," European Journal of Operational Research, Elsevier, vol. 201(3), pages 860-872, March.
    4. repec:dau:papers:123456789/11473 is not listed on IDEAS
    5. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    6. Milevsky,Moshe A., 2006. "The Calculus of Retirement Income," Cambridge Books, Cambridge University Press, number 9780521842587, September.
    7. Pliska, Stanley R. & Ye, Jinchun, 2007. "Optimal life insurance purchase and consumption/investment under uncertain lifetime," Journal of Banking & Finance, Elsevier, vol. 31(5), pages 1307-1319, May.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Zhang, Jinhui & Purcal, Sachi & Wei, Jiaqin, 2021. "Optimal life insurance and annuity demand under hyperbolic discounting when bequests are luxury goods," Insurance: Mathematics and Economics, Elsevier, vol. 101(PA), pages 80-90.

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