Time‐Consistent Individuals, Time‐Inconsistent Households

ABSTRACT I present a model of consumption and savings for a multiperson household in which members are imperfectly altruistic, derive utility from both private and shared public goods, and share wealth. I show that, despite having standard exponential time preferences, the household is time‐inconsistent: Members save too little and overspend on private consumption goods. The household remains time‐inconsistent even when members save separately, because the possibility of voluntary transfers or joint contribution to the public good preserves the dynamic commons problem. The household will choose to share wealth when the risk‐sharing benefits outweigh the utility cost of overconsumption.

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Publication Details

Journal
The Journal of Finance
Published
2024-10-16
DOI
https://doi.org/10.1111/jofi.13392
Citations
10
Primary Topic
Gender, Labor, and Family Dynamics
Type
article
Field-Weighted Citation Impact
2.79
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article

Time‐Consistent Individuals, Time‐Inconsistent Households

Andrew Hertzberg
10 citations
The Journal of Finance
Gender, Labor, and Family Dynamics
2.79
article

Time‐Consistent Individuals, Time‐Inconsistent Households

Andrew Hertzberg
article en
10 citations

Abstract

ABSTRACT I present a model of consumption and savings for a multiperson household in which members are imperfectly altruistic, derive utility from both private and shared public goods, and share wealth. I show that, despite having standard exponential time preferences, the household is time‐inconsistent: Members save too little and overspend on private consumption goods. The household remains time‐inconsistent even when members save separately, because the possibility of voluntary transfers or joint contribution to the public good preserves the dynamic commons problem. The household will choose to share wealth when the risk‐sharing benefits outweigh the utility cost of overconsumption.

The Journal of FinanceVol. 79(6)
Federal Reserve Bank of Philadelphia (US)
Openalex Percentile: Top 9%
Gender, Labor, and Family Dynamics
2.79
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