INTERTEMPORAL UTILITY SMOOTHING: THEORY AND APPLICATIONS |
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Authors: | Katsutoshi Wakai |
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Institution: | Graduate School of Economics, Kyoto University |
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Abstract: | This paper reviews models of intertemporal choice designed to be consistent with a phenomenon called a preference for spread; that is, where a decision‐maker prefers to spread good and bad consumption evenly over time. We closely examine the notion of utility smoothing adopted in these models as a source of the preference for spread. The paper also reviews extensions of these models where a strong aversion to volatility involved in a utility sequence causes preferences to be nonmonotone. Furthermore, to gain a better understanding of the behaviour implied by these models, we apply them to the Diamond growth model. |
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Keywords: | D90 D91 O40 |
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