On the time consistency of collective preferences

LUIS ALCALA

Buenos Aires

Congreso; Annual Meeting of the Latin American and Caribbean Economic Association and Latin American Meeting of the Econometric Society​ 2017; 2017

Universidad de San Andrés

This paper develops a dynamic model of collective decisions made by a finite number of agents with constant but different discount rates. Collective utility is a weighted sum of individual utilities with time-varying weights. Under standard separability assumptions, it is shown that collective preferences may be nonstationary but still satisfy time consistency. The assumption of time-varying weights is key to balance the need of the group for a changing distribution of consumption among its members over time with their tolerance for consumption fluctuations.