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On the time consistency of collective preferences

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  • Luis A. Alcala

Abstract

A dynamic model of collective consumption and saving decisions made by a finite number of agents with constant but different discount rates is developed. Collective utility is a weighted sum of individual utilities with time-varying utility weights. Under standard separability assumptions, it is shown that collective preferences may be nonstationary but still satisfy time consistency. The assumption of time-varying weights is key to balance the need of the group for a changing distribution of consumption among its members over time with their tolerance for consumption fluctuations.

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  • Luis A. Alcala, 2016. "On the time consistency of collective preferences," Papers 1607.02688, arXiv.org, revised Jul 2018.
    • Handle: RePEc:arx:papers:1607.02688
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    Cited by:

    1. Jean-Pierre Drugeon & Bertrand Wigniolle, 2017. "On Time-Consistent Collective Choice with Heterogeneous Quasi- Hyperbolic Discounting," PSE Working Papers halshs-01662833, HAL.
    2. Jean-Pierre Drugeon & Bertrand Wigniolle, 2021. "On Markovian collective choice with heterogeneous quasi-hyperbolic discounting," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 72(4), pages 1257-1296, November.

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