Heterogeneous Impatience in a Continuous-Time Model
نویسنده
چکیده
In a continuous-time economy with complete markets, we show how the heterogeneity in the individual consumers’ risk attitudes and impatience would affect the representative consumer’s counterparts. Specifically, our formulas tell us how his risk tolerance and impatience will change over time, and how his impatience will be affected by the changes in aggregate consumption levels. Under the assumption of equal and constant relative risk aversion across individual consumers, we characterize his discount factor by means of a completely monotone function of time. These results are used to analyze short-rate processes. JEL Classification Codes: D51, D53, D61, D81, D91, G12, G13.
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KIER DISCUSSION PAPER SERIES Heterogeneous Impatience in a Continuous-Time Model
In a continuous-time economy with complete markets, we study how the heterogeneity in the individual consumers’ risk tolerance and impatience affects the representative consumer’s risk tolerance and impatience. We derive some formulas, which indicate that the representative consumer’s impatience decrease over time, and whether his risk tolerance increases or decreases over time depends on the s...
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