Editing Intertemporal choice

{{short description|Study of how people choose between payoffs at different times}}
{{Refimprove|date=March 2009}}

In [[economics]], '''intertemporal choice''' is the study of the relative [[Valuation (finance)|value]] people assign to two or more payoffs at different points in time. This relationship is usually simplified to today and some future date. Intertemporal choice was introduced by Canadian economist [[John Rae (economist)|John Rae]] in 1834 in the "Sociological Theory of Capital". Later, [[Eugen von Böhm-Bawerk]] in 1889 and [[Irving Fisher]] in 1930 elaborated on the model.

== Fisher model ==
===Assumptions of the model===
# consumer's income is constant
# maximization of the utility
# anything above the line is out of explanation
# investments are generators of savings
# any property is indivisible and unchangeable
According to this model there are three types of consumption: '''past, present and future'''.

When making decisions between present and future consumption, the consumer takes his/her previous consumption into account. 

This decision making is based on an '''''[[indifference map]] with negative slope''''' because if he consumes something today it means that he can't consume it in the future and vice versa.

The revenue is in form of interest rate. Nominal interest rate - inflation  =  real interest rate

Denote
* <math>r</math> : interest rate
* <math>Y(t+1)</math> : income in time <math>t+1</math> or a future income 
* <math>Y(t)</math> : income in time <math>t</math> or a present income

Then maximum present consumption is: <math>Y(t) + \frac{Y(t+1)}{1+r}</math>

The maximum future consumption is: <math>(1+r)Y(t) + Y(t+1)</math>


==See also==
*[[Choice modelling]]
*[[Decision theory]]
*[[Discount function]]
*[[Discounted utility]]
*[[Intertemporal budget constraint]]
*[[Keynes–Ramsey rule]]
*[[Temporal discounting]]

==References==
{{reflist|refs=

<!---ref name=Hampton2018>{{cite journal | doi = 10.3389/fpsyg.2018.01545 | volume=9 | issue= 1545 | title=Things for Those Who Wait: Predictive Modeling Highlights Importance of Delay Discounting for Income Attainment | year=2018 | journal=Frontiers in Psychology | last1 = Hampton | first1 = W.| page=1545 | pmid=30233449 | pmc=6129952 | doi-access=free }}</ref>

<ref name=MacKillop2011>{{cite journal | doi = 10.1007/s00213-011-2229-0| volume=216 | issue= 3 | title=Delayed reward discounting and addictive behavior | year=2011 | journal=Psychopharmacology | last1 = MacKillop | first1 = J.| pages=305–321 | pmid=21373791 | pmc=3201846 }}</ref>

<ref name=Berns2007>{{cite journal|title=Intertemporal choice – Toward an Integrative Framework |journal=Trends in Cognitive Sciences |volume=11 |issue=11 |pages=482–8 |doi=10.1016/j.tics.2007.08.011 |pmid=17980645 |year=2007 |last1=Berns |first1=Gregory S. |last2=Laibson |first2=David |last3=Loewenstein |first3=George |s2cid=22282339 |url=https://dash.harvard.edu/bitstream/handle/1/4554332/Laibson_IntertemporalChoice.pdf?sequence=2 |url-status=bot: unknown |archive-url=https://web.archive.org/web/20160530144016/https://dash.harvard.edu/bitstream/handle/1/4554332/Laibson_IntertemporalChoice.pdf?sequence=2 |archive-date=2016-05-30 }}</ref>

<ref name=Thaler1997>{{cite journal|last1=Thaler |first1=Richard H. |title=Irving Fisher: Modern Behavioral Economist |journal=The American Economic Review |date=1997 |volume=87 |issue=2 |pages=439–441 |jstor=2950963 |url=http://faculty.chicagobooth.edu/richard.thaler/research/pdf/IrvingFisher.pdf |url-status=bot: unknown |archive-url=https://web.archive.org/web/20160304085631/http://faculty.chicagobooth.edu/richard.thaler/research/pdf/IrvingFisher.pdf |archive-date=2016-03-04 }}</ref>

<ref name=Auto4F1>{{cite book |last=Varian | first = Hal | title = Intermediate Micro Economics | year = 2006 }}</ref>

<ref name=Auto4F2>{{cite book|last1=Barro|first1=Robert J.|title=Macroeconomics|date=1998|publisher=MIT Press|location=Cambridge, Mass.|isbn=9780262024365|edition=5th|url=https://books.google.com/books?id=CtV1DDXaSi4C|language=en}}</ref>

<ref name=Mankiw2008>{{cite book|last1=Mankiw|first1=N. Gregory|title=Principles of Macroeconomics|date=2008|publisher=Cengage Learning|isbn=9780324589993|edition=5th|url=https://books.google.com/books?id=58KxPNa0hF4C|language=en}}</ref>

<ref name=Auto4F3>{{cite web|title=Adaptive expectations: Friedman's permanent income hypothesis|url=http://salome.lse.ac.uk/courses/ec220/G/ieppt/series2/C11F07.ppsx|access-date=2013-08-22|archive-url=https://web.archive.org/web/20160304063933/http://salome.lse.ac.uk/courses/ec220/G/ieppt/series2/C11F07.ppsx|archive-date=2016-03-04|url-status=dead}}</ref>

<ref name=Auto4F4>[[Hyperbolic discounting]]</ref>

<ref name=Auto4F5>{{cite journal|last=P. Redden|first=Joseph|title=Hyperbolic Discounting}}</ref--->






}}

[[Category:Decision theory]]
[[Category:Consumer behaviour]]
[[Category:Intertemporal economics]]
[[Category:Utility]]

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