CONSUMPTION AND INVESTMENT STRATEGIES WITH HYPERBOLIC DISCOUNTING AND LABOR INCOME

Abstract

We investigate the optimal consumption and investment decision problem of an agent whose time preference is timeinconsistent. Specifically, for a time-separable utility function, the agent's subjective discount factor is supposed to be changed randomly in the future. We provide closed-form solutions in the presence of income process. The method can be extended into the case with a stochastic income process.

This article was migrated from the previous system via automation. The abstract may not be written correctly. Please view the PDF file.