econ404lecture2handout - Economics 404: Behavioral...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 404: Behavioral Economics Lecture 2 Department of Economics Washington University in St. Louis Fall 2009 Economics 404 Fall 2009
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Announcements Revised office hours: Tuesdays 10–12 and 2–4 Teaching assistants: Shintaro Miura (smiura@artsci.wustl.edu) Nick Papageorge (papageorge@wustl.edu) Lin Zhang (lzhang@artsci.wustl.edu) Economics 404 Fall 2009
Background image of page 2
Overview The discounted utility model DU anomalies Quasi-hyperbolic discounting Economics 404 Fall 2009
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The discounted utility model Economics 404 Fall 2009
Background image of page 4
The Intertemporal Choice Problem Consider an individual with well-defined preferences over consumption, represented by u ( c t ) The individual expects to live forever, and will consume c 0 , c 1 , c 2 , . . . , c t , . . . in periods 0 , 1 , 2 , . . . , t , . . . , respectively The individual’s decision problem is to choose a consumption path ( c 0 , . . . , c t , . . . ) which maximizes her total utility U ( c 0 , . . . , c t , . . . ) = X t =0 d t u ( c t ) , where d t is the weight placed on consumption in period t Economics 404 Fall 2009
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Intertemporal Choice Problem Economics 404 Fall 2009
Background image of page 6
The Intertemporal Choice Problem Samuelson (1937) proposed the restriction d t = δ t One sensible interpretation: δ = 1 1 + r , where r is the market interest rate Economics 404 Fall 2009
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
“It is completely arbitrary to assume that the individual behaves so as to maximize an integral of the form envisage. .. any connection between utility as discussed here and any welfare
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 23

econ404lecture2handout - Economics 404: Behavioral...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online