Despite Fisher's (1930) psychological intuitions of and the formal treatment given by Yaari (1965, Review of Economic Studies 32, 137), the intertemporal model of choice is mainly a model with certain lifetime. The purpose of this paper is to reconsider this assumption, starting from a very simple two-period model of choice with lifetime uncertainty. We examine the comparative statics of the model at the first two orders and replace the concept of `pure time preference' by taking into account the subjective treatment of the probability of survival.
This is a preview of subscription content, access via your institution.
Buy single article
Instant access to the full article PDF.
Tax calculation will be finalised during checkout.
Aallais, M. (1947), Economie et Intérêt. Paris: Imprimerie Nationale.
Abel, A.B. (1985), Precautionary saving and accidental bequests, American Economic Review 75(4), 777-791.
Abdellaoui, M. (2002), A genuine rank-dependent generalization of the von Neumann-Morgenstern expected utility theorem. Econometrica 70(2), 717-736.
Ben-Porath, Y. (1967), The production of human capital and the life cycle of earnings, Journal of Political Economy 75(4), 352-365.
Blanchard, O.J. (1985), Debt, deficits and finite horizons. Journal of Political Economy 93(2), 223-247.
Diamond, P.A. (1965), National debt in a neo-classical growth model. American Economic Review 55(5), 1126-1150.
Drouhin, N. (1997), Système de retraite et accumulation du capital: un modèle de générations imbriquées avec durée de vie incertaine, Recherches économiques de Louvain 63(2), 133-151.
Fisher, I., (1907), The rate of Interest: Its Nature, Determination and Relation to Economic Phenomena. New-York: Macmillan.
Friedman, M., (1957), A Theory of the Consumption Function. Princeton, NJ: Princeton University Press.
Furster, L. (2000), Capital accumulation in an economy with dynasties and uncertain lifetimes, Review of Economic Dynamics 3, 650-674.
Gollier, C. (2001), The Economics of Risk and Time. MIT Press, Cambridge, MA.
Heckman, J. (1974), Life cycle consumption and labor supply, an explanation of the relationship between income and consumption over the life cycle, American Economic Review 64(1), 188-194.
Kahneman, D. and Tversky, A. (1979), Prospect theory: An analysis of decision under risk, Econometrica 47, 263-291.
Karni, E. and Zilcha, I. (1989), Aggregate and distributional effects of fair social security. Journal of Public Economics 40, 37-56.
Keynes, J.M. (1936), The General Theory of Employment, Interest and Money. London: Mac Millan.
Merton, R. (1969), Lifetime portfolio selection under uncertainty: The continuous time case, Review of Economics and Statistics 51, 247-257.
Modigliani, F. and Brumberg, R. (1954), Utility analysis and the consumption function: An interpretation of cross section data. In: K.K. Kurikara (ed.), Post Keynesian Economics (pp. 388-436). Rutgers University Press, New Brunswick, NJ.
Quiggin, J. (1982), A theory of anticipated utility, Journal of Economic Behavior and Organization 3(4), 323-343.
Tobin, J. (1947), A theoretical and statistical analysis of consumer saving. Ph.D. dissertation, Harvard University.
Ramsey, F.P., (1928), A mathematical theory of saving, Economic Journal 38(152), 543-559.
Samuelson, P.A. (1958), An exact consumption-loan model of interest with or without the social contrivance of money, Journal of Political Economy 56(6), 467-482.
Samuelson, P.A. (1969), Lifetime portfolio selection by dynamic stochastic programming, Review of Economics and Statistics 51, 239-246.
Stigler, G. and Becker, G.S. (1977), De gustibus non est disputandum, American Economic Review 67(2), 76-90.
Yaari, M.E. (1965), Uncertain lifetime, life insurance, and the theory of the consumer, Review of Economic Studies 32, 137-150.
About this article
Cite this article
Drouhin, N. Lifetime Uncertainty and Time Preference. Theory and Decision 51, 145–172 (2001). https://doi.org/10.1023/A:1015598809123
- Intertemporal choice
- Lifetime uncertainty
- Rank dependent utility