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Questions tagged [intertemporal-choice]

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Partially Sophisticated Quasi-Hyperbolic Discounting Problem

I am trying to follow the bottom method for partially sophisticated hyperbolic discounting... The setup (modified from an earlier problem in the same course) is that a person will get different "...
user10478's user avatar
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What are the arguments for and against the supremacy of the current self?

In this video, the professor attempts to explain how the course's motivation of temporal discounting makes (what strikes me as) a pretty extravagant assumption. Now, if you think about your future ...
user10478's user avatar
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1 answer
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Intertemporal profit maximization

Assume a producer wishes to maximize the net present value, choosing optimal quantities of K and L. variables are time dependent. y is the production function, p is the price of y. K is capital, r is ...
Meg's user avatar
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Intertemporal consumption with heterogeneous/multiple goods

I'm currently trying to build a CGE, and I'm stuck at the household's problem which is about intertemporal utility maximisation. The household consumes multiple heterogeneous goods $C_i$ (I'm limiting ...
Meg's user avatar
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3 votes
1 answer
181 views

Intertemporal Utility Optimization For Multiple Goods

I'm building an economic simulation game and I'm trying to solve for the values that a person will spend on each good and the amount they will save in the current period, taking into account all ...
Aidan Loten's user avatar
1 vote
1 answer
203 views

What is the household i’s intertemporal budget constraint (utility depends on household consumption and neighbourhood's average consumption)?

Assume that household i derives utility from consumption, but now lifetime utility is given by the following expression: $$ U_i = \sum_{t=0}^{\infty} e^{ -\rho t}\frac{1}{1-\theta} \left(\frac{C_{i,t}}...
Delia's user avatar
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3 votes
1 answer
206 views

Can euler equations and intratemporal optimality conditions ever bind one another?

The Euler equation is an a solution concept in most macroeconomic models which determine the optimal path to be taken in a consumption sequence. In a case where we have multiple consumption goods (say ...
EconJohn's user avatar
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2 votes
0 answers
23 views

How does intertemporal substitution affect the equivalence between cap-and-trade and carbon taxes?

It is often stated that, with perfect information and neglecting administrative burdens, the following two policies are economically equivalent: a carbon tax of $T$ that results in a equilibrium ...
tparker's user avatar
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1 vote
1 answer
112 views

Optimal consumption for infinite number of periods and exogenous income

I have the following optimization problem: $\max_{\{c_t, s_{t+1}\}} \Pi_{t=0}^\infty c_t^{\beta^t}$ $\text{subject to } \space c_t + s_{t+1} = y_t + (1 + r) s_t \text{ and } s_0 = 0$ How do I find ...
Arturo Sbr's user avatar
1 vote
1 answer
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How is the intertemporal budget constraint derived from all intratemporal constraints

Suppose an agent receives a fixed (exogenous) income every period, $y_t$, and can either spend it on $c_t$ or save it/borrow ($s_{t+1}$). Suppose also that the agent starts off with no savings or debt....
Arturo Sbr's user avatar
1 vote
1 answer
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Deriving optimality conditions in the New Keynesian model framework with an undefined consumption function

I am trying to solve the household's optimization problem in the New Keynesian model framework, where utility is given by $$ E_0\sum_{t=0}^\infty \beta^t \mathcal{U}(C_t,L_t,N_t;Z_t) $$ and period ...
Spotdoddy's user avatar
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1 answer
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Perfectly functioning credit markets and consumer saving

Today in my Macroeconomics lecture, while covering the Real Intertemporal Model with Investment (Chapter 11 of Williamson's Macroeconomics), my professor proponed that a key assumption to not make ...
mtcicero's user avatar
  • 101
2 votes
1 answer
303 views

Meaning of «intertemporal substitution effect dominates the income effect»

Assume a household intertemporal optimisation problem, where they only either consume or labour, and one of the equilibrium conditions states that labour will be a positive function of productivity, ...
An old man in the sea.'s user avatar
1 vote
1 answer
383 views

Metzler diagram interpretation

Suppose we have a graph whose axes are r (interest rate) and S/I/Y/whatever. I'm studying intertemporal models right now, and i got a bit confused. According to my textbook, the area underneath S is ...
user31270's user avatar
2 votes
2 answers
345 views

In an intertemporal (2-period) consumption model, why is the investment rate independent of discount factor?

In lecture, my professor defined the following 2-period consumption model: $c_i = $ consumption in period $i$. $y =$ endowed income in period 1. $r = $ interest rate in perfect credit markets. $h = $ ...
azvecon's user avatar
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5 votes
1 answer
230 views

Proof that stochastic discount factor is positive in complete markets

I am looking for a reference (with a proof possibly) to understand why the completeness of markets implies that the stochastic discount factor is strictly positive in the context of intertemporal ...
Three Diag's user avatar
1 vote
3 answers
202 views

Why does Ricardian Equivalence not hold when there are different borrowing and lending rates on the market?

If you can propose any explanation (intuitive, graphical or algebraic), I will appreciate it
Arx's user avatar
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1 vote
1 answer
166 views

How do we define an efficient tax in microeconomics?

I am currently working through problems to study for an upcoming exam. I am not seeking a solution per se. I am looking at the intertemporal choice model. I am looking at two periods where consumption ...
Brennan's user avatar
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