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Future plans and errors

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  • Blavatskyy, Pavlo

Abstract

Actions chosen today nearly always entail various consequences in the future, which creates a microeconomic problem of intertemporal choice. Preferences over future consumption plans may be inconsistent, imprecise, affected by noise or random errors. Some errors are less likely to happen than the others. A binary choice problem where one intertemporal alternative always (i.e. in every period of time) yields a better consequence than the other arguably leaves very little room for error. This paper presents a microeconomic model of discrete intertemporal choice (which is equivalent to heteroscedastic probit/logit) that rules out such unlikely errors (i.e. violations of period-wise monotonicity).

Suggested Citation

  • Blavatskyy, Pavlo, 2019. "Future plans and errors," Mathematical Social Sciences, Elsevier, vol. 102(C), pages 85-92.
    • Handle: RePEc:eee:matsoc:v:102:y:2019:i:c:p:85-92
    DOI: 10.1016/j.mathsocsci.2019.08.001
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