Date of Award
Economics and Finance
This paper presents two life-cycle models of consumption implementing novel assumptions about time preference and subjective time. The goal of this paper is to investigate implications of the existence of subjective time to consumption decisions over the life cycle. The first model is a model of 'systematic impatience' and implements the assumption of increasing subjective time by specifying a time dependent rate of time preference upon which the rational consumers in this model maximize lifetime utility. The second model investigates consumer behavior in subjective time, or the subjective sense of the actual passage of time. Consumers in this model maximize lifetime utility in subjective time. The optimal subjective consumption and saving functions are then mapped into real time. Both models are then compared to empirical findings on consumption theory.
Bailey, Michael Charles, "Consumption, Time Preference, and the Life Cycle" (2007). Undergraduate Honors Capstone Projects. 664.
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L. Dwight Israelsen
Departmental Honors Advisor