Collective Investment Decision Making With Heterogeneous Time Preferences

Topics:
Decision making
Tags:
Allocation,
Business Operations,
Decision-making,
Investment,
Investment Decision,
National Bureau Of Economic Research,
Preference,
Real Estate
Source:
National Bureau of Economic Research

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Overview: This paper examines the investment decision problem of a group whose members have heterogeneous time preferences. In particular, they have different discount factors for utility, possibly not exponential. It characterizes the properties of efficient allocations of resources and of shadow prices that would decentralize such allocations. The paper shows in particular that the term structure of interest rates is decreasing when all members have DARA preferences. Heterogeneous groups should not use exponential discounting for their collective investment decisions even if all agents discount exponentially. The paper also exhibit conditions that lead the representative agent to have a rate of impatience that decreases with GDP per capita.

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Format: HTML | Size: 372KB | Date: Apr 2003 | Pages: 31

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