We show that a steeply increasing workload before a deadline is compatible with time-consistent preferences. The key departure from the literature is that we consider a stochastic environment where success of effort is not guaranteed. -- Increasing Workload ; Deadline ; Stochasticity

Dybvig [1995] finds optimal spending and investment strategies for a perpetual endowment that has no tolerance for spending declines. His spending rule is a ratchet --- spending never decreases, but has a substantial chance of increasing. We find the ratchet consumption rule for an investor with...

Both data and people's self-reports reveal that there is an undersaving problem. Behavioral economics seeks to explain this phenomenon with the concept of hyperbolic discounting. In essence, short-term actions are inconsistent with long-term goals. This is applied to the German pension system in...

We study collective decisions by time-discounting individuals choosing a common consumption stream. We show that with any heterogeneity in time preferences, every Pareto efficient and non-dictatorial method of aggregating utility functions must be time-inconsistent. We also show that decisions...

We study centipede games played by an infinite sequence of players. Following the literature on time-inconsistent preferences, we distinguish two types of decision makers, naive and sophisticated, and the corresponding solution concepts, naïve ϵ-equilibrium and sophisticated ϵ-equilibrium. We...

This Article studies the durapolist, the durable-goods monopolist. Durapolists have long argued that, unlike perishable-goods monopolists, they face difficulties in exercising market power despite their monopolistic position. During the past thirty years, economists have extensively studied the...

This paper investigates a general relationship between risk and time preferences. I consider a decision maker who chooses between consumption of a particular prize in one period and a different prize in another period. The individual believes that today’s good is certain, and that, as the...

In their model of addiction, O´Donoghue and Rabin obtain a counterintuitive result: a person that is fully aware of his self-control problems (sophisticate) is more prone to become addicted than one who is fully naware (na¨ıf). In this paper we show that this result arises from their...

This paper has two main goals. The first is to show that behavioral rather than maximizing principles emerge from textual analysis as the microeconomic foundations for Keynes’s Consumption Theory; the second goal is to demonstrate that it is possible to ground a Keynesian-type aggregate...

We extend the classic Merton (1969, 1971) problem that investigates the joint consumption-savings and portfolio-selection problem under capital risk by assuming sophisticated but time-inconsistent agents. We introduce stochastic hyperbolic preferences as in Harris and Laibson (2013) and find...