American Economic Review Vol. 104 No. 12 2014

Consume Now or Later? Time Inconsistency, Collective Choice, and Revealed Preference

Abi Adams¹; Laurens Cherchye²; Bram De Rock³; Ewout Verriest⁴

¹ Department of Economics, University of Oxford, Manor Road Building, Oxford OX1 3UQ, United Kingdom, and Institute for Fiscal Studies (e-mail: ) · ² Center for Economic Studies, University of Leuven, E. Sabbelaan 53, B-8500 Kortrijk, Belgium (e-mail: ) · ³ ECARES, Université Libre de Bruxelles, Avenue F. D. Roosevelt 50, CP 114, B-1050 Brussels, Belgium (e-mail: ) · ⁴ Department of Economics, New York University, 19 W. Fourth Street, New York, NY 10012 (e-mail: ).

Abstract

We develop a revealed preference methodology that allows us to explore whether time inconsistencies in household choice are the product of individual preference nonstationarities or the result of individual heterogeneity and renegotiation within the household. An empirical application to household-level microdata highlights that an explicit recognition of the collective nature of household choice enables the observed behavior to be rationalized by a theory that assumes preference stationarity at the individual level. The methodology created in this paper also facilitates the recovery of theory-consistent discount rates for each individual within particular household under study.

DOI

10.1257/aer.104.12.4147

Volume

104

Issue

12

Pages

4147-4183

Language

en

Sources

openalex bibtex:phds-export.bib crossref

Cite

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