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Intertemporal Utility Smoothing: Theory and Applications

Intertemporal Utility Smoothing: Theory and Applications 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Japanese Economic Review Springer Journals

Intertemporal Utility Smoothing: Theory and Applications

Wakai, Katsutoshi
The Japanese Economic Review , Volume 64 (1): 26 – Mar 1, 2013
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References (17)

Publisher
Springer Journals
Copyright
2012 Japanese Economic Association
ISSN
1352-4739
eISSN
1468-5876
DOI
10.1111/j.1468-5876.2012.00587.x
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

The Japanese Economic Review – Springer Journals

Published: Mar 1, 2013

Keywords: economics, general; microeconomics; macroeconomics/monetary economics//financial economics; econometrics; development economics; economic history

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