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Is intertemporal choice theory testable?


Kübler, Felix (2004). Is intertemporal choice theory testable? Journal of Mathematical Economics, 40(1-2):177-189.

Abstract

Kreps–Porteus preferences constitute a widely used alternative to time separability. We showin this paper that with these preferences utility maximization does not impose any observable restrictions on a household’s savings decisions or on choices in good markets over time. The additional assumption of a weakly separable aggregator is needed to ensure that the assumption of utility maximization restricts intertemporal choices. Under this assumption, choices in spot marketsare characterized by a strong axiom of revealed preferences (SSARP).Under uncertainty Kreps–Porteus preferences impose observable restrictions on portfolio choice if one observes the last period of an individual’s planning horizon. Otherwise there are no restrictions.

Kreps–Porteus preferences constitute a widely used alternative to time separability. We showin this paper that with these preferences utility maximization does not impose any observable restrictions on a household’s savings decisions or on choices in good markets over time. The additional assumption of a weakly separable aggregator is needed to ensure that the assumption of utility maximization restricts intertemporal choices. Under this assumption, choices in spot marketsare characterized by a strong axiom of revealed preferences (SSARP).Under uncertainty Kreps–Porteus preferences impose observable restrictions on portfolio choice if one observes the last period of an individual’s planning horizon. Otherwise there are no restrictions.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Language:English
Date:1 January 2004
Deposited On:30 Jul 2012 12:54
Last Modified:05 Apr 2016 15:48
Publisher:Elsevier
ISSN:0304-4068
Publisher DOI:10.1016/S0304-4068(03)00091-0
Other Identification Number:merlin-id:6963
Permanent URL: http://doi.org/10.5167/uzh-62196

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