Randomly Evolving Tastes and Delayed Commitment

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2016-06-09

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Abstract

We consider a decision maker with randomly evolving tastes who faces dynamic decision situations that involve intertemporal tradeoffs, such as those in consumption savings problems. We axiomatize a recursive representation of choice that features uncertain consumption utilities, which evolve according to a subjective Markov process. The parameters of the representation, which are the subjective Markov process governing the evolution of utilities, and the discount factor, are uniquely identified from behavior. We relate the correlation of tastes over time and the desire to delay commitment to future consumption.

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Scholars@Duke

Sadowski

Philipp Sadowski

Associate Professor of Economics

Philipp Sadowski's work focuses on microeconomic theory, decision theory and behavioral economics. A central research interest is to better understand the interaction between observable economic behavior and the often not directly observable formation of beliefs. Topics include subjective learning, rational inattention, changing tastes, and other-regarding motives such as shame and magical thinking. Philipp's research has been published in leading journals, presented internationally, and supported by the National Science Foundation.


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