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In this paper, 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 collective unit. An empirical application to household-level microdata highlights that an explicit recognition of the collective nature of household choice enables the vast majority of observed behaviour to be rationalised 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 a particular household under study. We find that couples characterised by lower divergence in spousal discount rates are older, which we take as an indication of experiencing higher match quality.
Authors
Research Associate Katholieke Universiteit Leuven
Laurens is a Research Associate of the IFS and a Professor in the Department of Economics, KU Leuven.
Research Associate Université libre de Bruxelles
Bram is a Research Associate of the IFS, a Professor of Economics at ULB and a Professor of Mathematics and Statistics at KU Leuven.
Research Fellow University of Oxford
Abi's research sits within Applied Microeconomics, often focused on the econometrics of consumer and family choice.
Ewout Verriest
Working Paper details
- DOI
- 10.1920/wp.ifs.2014.1408
- Publisher
- Institute for Fiscal Studies
Suggested citation
Adams-Prassl, A et al. (2014). Consume now or later? Time inconsistency, collective choice and revealed preference. London: Institute for Fiscal Studies. Available at: https://ifs.org.uk/publications/consume-now-or-later-time-inconsistency-collective-choice-and-revealed-preference (accessed: 11 May 2024).
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