How do individuals with time-inconsistent preferences make consumption-savings decisions? We try to answer this question by considering the simplest possible form of consumption-savings problem, assuming that discountingg is quasi-geometric. A solution to the decision problem is then a...

Calibrated versions of existing representative-agent models have in common that the welfare costs of business cycles are extremely small. We investigate the welfare effects of eliminating business cycles in a model with substantial consumer heterogeneity. The heterogeneity is due to uninsurable...

This paper shows that if the consumers in a "standard" real business cycle (RBC) model are permitted to use near-rational decision rules -- that is, decision rules from which they suffer trivial utility losses -- then it is difficult to distinguish the standard model from several competing...

In this paper we attempt to (i) extend the competitive equilibrium neoclassical growth model to incorporate consumer preferences that are of the Gul-Pesendorfer variety; (ii) use the model to analyze taxation and welfare; and (iii) extend and specialize the Gul-Pesendorfer temptation formulation...

We analuze a general-equilibrium asset pricing model where a small subset of the consumers/investors have a short-run "urge to save." That is, their attitudetoward consumption in the long run is a standard one--they do place zero weight on consumption far enough out in the future--but their...