39 Pages Posted: 11 Jun 2016
Date Written: June 9, 2016
We consider a decision maker with randomly evolving tastes who faces dynamic decision situations that involve intertemporal tradeoffs, such as those in consumption savings problems. We axiomatize a recursive representation of choice that features uncertain consumption utilities, which evolve according to a subjective Markov process. The parameters of the representation, which are the subjective Markov process governing the evolution of utilities, and the discount factor, are uniquely identified from behavior. We relate the correlation of tastes over time and the desire to delay commitment to future consumption.
Suggested Citation: Suggested Citation
Krishna, R. Vijay and Sadowski, Philipp, Randomly Evolving Tastes and Delayed Commitment (June 9, 2016). Economic Research Initiatives at Duke (ERID) Working Paper No. 218. Available at SSRN: https://ssrn.com/abstract=2793446 or http://dx.doi.org/10.2139/ssrn.2793446