A Vague Theory of Choice Over Time
29 Pages Posted: 2 Aug 2004
Date Written: July 2004
We propose a novel approach to modelling time preferences, based on a cognitive shortcoming of human decision makers: the perception of future events becomes increasingly "blurred" as the events are pushed further in time. We axiomatise a class of preference representations which can be specialised to rationalise "anomalies" such as preference reversals and cyclical preferences. We also present an application to a form of time inconsistency which we dub "the now or never fallacy".
Keywords: Time preferences, hyperbolic discounting, preference reversal
JEL Classification: A12, C70, D90
Suggested Citation: Suggested Citation