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Article Dans Une Revue Journal of Economic Dynamics and Control Année : 2015

A rank-dependent utility model of uncertain lifetime

Nicolas Drouhin

Résumé

In a continuous time life cycle model of consumption with an uncertain lifetime, we use a non-parametric specification of rank-dependent utility theory to characterize the preferences of the agent. We prove that time consistency holds for a subclass of probability-weighting function, providing the foundation for a constant rate of time preference that interacts multiplicatively with the hazard rate instead of additively as in \citet{Yaari1965} seminal model. We calibrate both models to explain the hump in the life-cycle consumption, and show that the multiplicative model is more robust.
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Dates et versions

halshs-01238589 , version 1 (05-12-2015)

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  • HAL Id : halshs-01238589 , version 1

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Nicolas Drouhin. A rank-dependent utility model of uncertain lifetime. Journal of Economic Dynamics and Control, 2015, 53, pp.208-224. ⟨halshs-01238589⟩
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