Time Consistency: Stationarity and Time Invariance
Econometrica · 2015 · Volume 83 · Issue 1
Abstract
A sequence of experiments documents static and dynamic “preference reversals” between sooner-smaller and later-larger rewards, when the sooner reward could be immediate. The theoretically motivated design permits separate identification oftime consistent,stationary, andtime invariantchoices. At least half of the subjects are time consistent, but only three-quarters of them exhibit stationary choices. About half of subjects with time inconsistent choices have stationary preferences. These results challenge the view that present-bias preferences are the main source of time inconsistent choices.
Keywords
Time discounting, diminishing impatiences, intertemporal preferences
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