Abstract
Kreps-Porteus preferences constitute a widely used alternative to time separability. We show in this paper that with these preferences utility maximization does not impose any observable restrictions on a household—s savings decisions or on choices in good markets over time. The additional assumption of a weakly separable aggregator is needed to ensure that the assumption of utility maximization restricts intertemporal choices. Under this assumption, choices in spot markets are characterized by a strong axiom of revealed preferences (SSARP).
Under uncertainty Kreps-Porteus preferences impose observable restrictions on portfolio choice if one observes the last period of an individual—s planning horizon. Otherwise there are no restrictions.
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© 2008 Springer-Verlag Berlin Heidelberg
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Kubler, F. (2008). Is Intertemporal Choice Theory Testable?. In: Computational Aspects of General Equilibrium Theory. Lecture Notes in Economics and Mathematical Systems, vol 604. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-76591-2_7
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DOI: https://doi.org/10.1007/978-3-540-76591-2_7
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-76590-5
Online ISBN: 978-3-540-76591-2
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