Quasi-hyperbolic discounting under recursive utility and consumption-investment decisions

• 成果类型: Article
• 署名作者: Shigeta, Yuki
• 署名单位: Tokyo Keizai University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2022.105518
• 发表日期: 2022
• 关键词: Quasi -hyperbolic discounting; Epstein-Zin utility; Consumption-investment problem; Beta -Delta model; recursive utility

摘要

This paper examines an Epstein-Zin recursive utility with quasi-hyperbolic discounting in continuous time. I directly define the utility process supporting the Hamilton-Jacobi-Bellman (HJB) equation in the literature and consider Merton's optimal consumption-investment problem for application. I show that a solution to the HJB equation is the value function. The numerical and mathematical analyses show that un-like in the constant relative risk aversion utility, present bias in the Epstein-Zin utility causes economically significant overconsumption, maintaining a plausible attitude toward risks. Additionally, the sophisticated agent's preproperation occurs if and only if the elasticity of intertemporal substitution is larger than one.(c) 2022 The Author(s). Published by Elsevier Inc. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).