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Collective Investment Decision Making with Heterogeneous Time Preferences

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  • Christian Gollier
  • Richard Zeckhauser

Abstract

We examine the investment decision problem of a group whose members have heterogeneous time preferences. In particular, they have different discount factors for utility, possibly not exponential. We characterize the properties of efficient allocations of resources and of shadow prices that would decentralize such allocations. We show in particular that the term structure of interest rates is decreasing when all members have DARA preferences. Heterogeneous groups should not use exponential discounting for their collective investment decisions even if all agents discount exponentially. We also exhibit conditions that lead the representative agent to have a rate of impatience that decreases with GDP per capita.

Suggested Citation

  • Christian Gollier & Richard Zeckhauser, 2003. "Collective Investment Decision Making with Heterogeneous Time Preferences," NBER Working Papers 9629, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9629
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    Cited by:

    1. Mohammed Abdellaoui & Olivier l'Haridon & Corina Paraschiv, 2013. "Do Couples Discount Future Consequences Less than Individuals?," Economics Working Paper Archive (University of Rennes & University of Caen) 201320, Center for Research in Economics and Management (CREM), University of Rennes, University of Caen and CNRS.
    2. Ben Groom & Cameron Hepburn & Phoebe Koundouri & David Pearce, 2005. "Declining Discount Rates: The Long and the Short of it," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(4), pages 445-493, December.
    3. Penyalver, Domingo & Turró, Mateu & Zavala-Rojas, Diana, 2018. "Intergenerational perception of the utility of major transport projects," Research in Transportation Economics, Elsevier, vol. 70(C), pages 97-111.

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    More about this item

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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