Collective Investment Decision Making with Heterogenous Time Preferences

35 Pages Posted: 19 Apr 2003

See all articles by Christian Gollier

Christian Gollier

University of Toulouse 1 - Industrial Economic Institute (IDEI); CESifo (Center for Economic Studies and Ifo Institute)

Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Date Written: April 2003

Abstract

We examine the investment decision problem of a group whose members have heterogeneous time preferences. In particular, they have different discount factors for utility, possibly not exponential. We characterize the properties of efficient allocations of resources and of shadow prices that would decentralize such allocations. We show in particular that the term structure of interest rates is decreasing when all members have DARA preferences. Heterogeneous groups should not use exponential discounting for their collective investment decisions even if all agents discount exponentially. We also exhibit conditions that lead the representative agent to have a rate of impatience that decreases with GDP per capita.

Keywords: Aggregation of Preferences, Hyperbolic Discounting, Impatience, Time Preference, Investment and Consumption

JEL Classification: D7

Suggested Citation

Gollier, Christian and Zeckhauser, Richard J., Collective Investment Decision Making with Heterogenous Time Preferences (April 2003). CESifo Working Paper Series No. 915. Available at SSRN: https://ssrn.com/abstract=396442

Christian Gollier (Contact Author)

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

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CESifo (Center for Economic Studies and Ifo Institute) ( email )

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Richard J. Zeckhauser

Harvard University - Harvard Kennedy School (HKS) ( email )

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National Bureau of Economic Research (NBER) ( email )

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