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SUBSTITUTION AND REVENUE EFFECTS WITH ENDOGENOUS IMPATIENCE

Published online by Cambridge University Press:  16 July 2002

Jean-Pierre Drugeon
Affiliation:
CNRS-EVREQVA
Bertrand Wigniolle
Affiliation:
EVREQVA, University of Paris I–Panthéon-Sorbonne & LIBRE, University of Franche-Comté
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Abstract

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Building on a nonlinear additively separable representation for the generator of preferences, this article provides an extensive characterization of intertemporal consumption—leisure arbitrages with an endogenous measure of impatience. A joint characterization of the comparative dynamics of consumption and leisure is undertaken. An analytical approach first puts in evidence a classical Slutsky decomposition between revenue and substitution effects after various perturbations. Those conclusions are at a second stage illustrated by a three-dimensional geometric argument.

Type
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Copyright
© 2002 Cambridge University Press