Dynamic Choices of Hyperbolic Consumers

摘要: Laboratory and field studies of time preference find that discount rates are much greater in the short-run than long-run. Hyperbolic functions capture this property. This paper solves decision problem a hyperbolic consumer who faces stochastic income borrowing constraint. The uses bounded variation calculus to derive Euler Relation, natural generalization standard Exponential Relation. Relation implies consumers act as if they have endogenous rise fall with future marginal propensity consume (e.g., endogenously range from 5% 41% for example discussed paper).