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  4. December 2014
  5. Consume Now or Later? Time Inconsistency, Collective Choice, and Revealed Preference

Consume Now or Later? Time Inconsistency, Collective Choice, and Revealed Preference

  • Abi Adams
  • Laurens Cherchye
  • Bram De Rock
  • Ewout Verriest
American Economic Review
vol. 104, no. 12, December 2014
(pp. 4147-83)
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Abstract

We develop a revealed preference methodology that allows us to explore whether time inconsistencies in household choice are the product of individual preference nonstationarities or the result of individual heterogeneity and renegotiation within the household. An empirical application to household-level microdata highlights that an explicit recognition of the collective nature of household choice enables the observed behavior to be rationalized by a theory that assumes preference stationarity at the individual level. The methodology created in this paper also facilitates the recovery of theory-consistent discount rates for each individual within particular household under study. (JEL E24, F13, F16)

Citation

Adams, Abi, Laurens Cherchye, Bram De Rock, and Ewout Verriest. 2014. "Consume Now or Later? Time Inconsistency, Collective Choice, and Revealed Preference." American Economic Review, 104 (12): 4147-83. DOI: 10.1257/aer.104.12.4147

Additional Materials

JEL Classification

  • E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
  • F13 Trade Policy; International Trade Organizations
  • F16 Trade and Labor Market Interactions