Template-type: ReDif-Paper 1.0
Author-Name: Herings P. Jean-Jacques
Author-Name: Rohde Kirsten I.M.
Author-workplace-name: METEOR
Title: Time-inconsistent Preferences in General Equilibrium
Abstract: There is a growing body of research in economics that studies the consequences of time-inconsistent preferences. This paper introduces time-inconsistent preferences in a general equilibrium setting. We discuss how the standard notion of competitive equilibrium should be extended in order to allow for changes in intertemporal preferences. Depending on whether or not agents recognize that their intertemporal preferences change, agents are called sophisticated or naïve. We present competitive equilibrium notions for economies with naïve agents and economies with sophisticated agents and provide assumptions under which both types of equilibria exist. Time-inconsistency also raises conceptual issues on the appropriate notion of efficiency. Of particular importance is the way future intertemporal preferences are taken into account. An example shows that sophisticated equilibria may be less efficient than naïve equilibria. We specify suitable conditions for which both types of equilibria satisfy appropriate efficiency notions.
Keywords: Economics ; 
Series: Research Memoranda
Creation-Date: 2003
Number: 056
File-URL: http://digitalarchive.maastrichtuniversity.nl/fedora/objects/guid:8ca75c6b-522f-4172-b7d2-308c36ba3d4f/datastreams/ASSET1/content
File-Format: application/pdf
File-Size: 426256
Handle: RePEc:unm:umamet:2003056