Life-Cycle Preferences Revisited
ETH Risk Center Working Paper No. 12-001
47 Pages Posted: 21 Dec 2012
There are 2 versions of this paper
Life-Cycle Preferences Revisited
Date Written: January 10, 2012
Abstract
An axiomatic construction for lifecycle preferences accounting for the finiteness and the randomness of life duration is provided. We emphasise the role of intertemporal correlation aversion and explain why multiplication preferences provide an interesting alternative to additive preferences, allowing to separate risk aversion from intertemporal elasticity of substitution. Implications regarding the shape of the optimal consumption profiles are discussed.
Keywords: Intertemporal choice, Life-cycle models, Multivariate risk aversion, Uncertain lifetime
JEL Classification: D91
Suggested Citation: Suggested Citation
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