Abstract
There is a growing body of research in economics that studies the consequences of time-inconsistent preferences. This paper introduces time-inconsistent preferences in a general equilibrium setting. We discuss how the standard notion of competitive equilibrium should be extended in order to allow for changes in intertemporal preferences. Depending on whether or not agents recognize that their intertemporal preferences change, agents are called sophisticated or naA¯ve. We present competitive equilibrium notions for economies with naA¯ve agents and economies with sophisticated agents and provide assumptions under which both types of equilibria exist. Time-inconsistency also raises conceptual issues on the appropriate notion of efficiency. Of particular importance is the way future intertemporal preferences are taken into account. An example shows that sophisticated equilibria may be less efficient than naA¯ve equilibria. We specify suitable conditions for which both types of equilibria satisfy appropriate efficiency notions.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
