Randomly Evolving Tastes and Delayed Commitment

R. Vijay Krishna
2016 Social Science Research Network  
We consider a decision maker with randomly evolving tastes who faces dynamic decision situations that involve intertemporal tradeoffs, such as those in consumption savings problems. We axiomatize a recursive representation of choice that features uncertain consumption utilities, which evolve according to a subjective Markov process. The parameters of the representation, which are the subjective Markov process governing the evolution of utilities, and the discount factor, are uniquely identi ed
more » ... uniquely identi ed from behavior. We relate the correlation of tastes over time and the desire to delay commitment to future consumption.
doi:10.2139/ssrn.2793446 fatcat:gvffem4gvfe6lfag32vvfd7ybe