Title: Past and Future: Backward and Forward Discounting.
Authors: Ray, Debraj; Vellodi, Nikhil; Wang, Ruqu
Abstract: We study a model of time preference in which both current consumption and the memory of past consumption enter "experienced utility"—or the felicity—of an individual. An individual derives overall utility from her own felicity and the anticipated felicities of future selves. These postulates permit an agent to anticipate future regret in current decisions, and generate a set of novel testable implications in line with empirical evidence. The model can be applied to disparate phenomena, including present bias, equilibrium savings behavior, anticipation of regret, and career concerns.
Subjects: REGRET; EXPECTATION (Psychology); AXIOMS; EQUILIBRIUM; MEMORY
Publication: Journal of the European Economic Association, 2024, Vol 22, Issue 2, p837
ISSN: 1542-4766
Publication type: Academic Journal
DOI: 10.1093/jeea/jvad036

Past and Future: Backward and Forward Discounting.

Ray, Debraj; Vellodi, Nikhil; Wang, Ruqu