A Brief Summary: Theoretical Part of the 'Non-Parametric Test of Time Consistency: Present Bias and Future Bias'

Abstract

This short note summarizes the theory part of "Non-parametric test of time consistency: Present bias and Future bias" [Takeuchi, forthcoming, Games and Economic Behavior]. It proves that (1) the sub(super)modular equivalent delay function corresponds to present (future) bias, and it also presents (2) the elicitation of future bias and increasing impatience, and (3) the estimation of time discount function which is independent of the utility function. Figure illustrates the inverse S-shape time discount function accommodates present and future biases at the same time.

Keywords: Non-parametric test of time consistency, future bias, equivalent delay

JEL Classification: C91, D81, D99