Luttmer, Erzo G. J.: Subjective Discount Factors
World Conference Econometric Society, 2000, Seattle

Erzo G. J. Luttmer, London School of Economics
Thomas Mariotti, London School of Economics
Subjective Discount Factors
Session: C-1-24  Friday 11 August 2000  by Luttmer, Erzo G. J.
This paper describes the equilibrium of an endowment economy in which consumers with arbitrary subjective discount factors and quasi-homothetic period utility functions follow Markov strategies. Explicit expressions are given for state prices and consumption-wealth ratios. If utility is logarithmic or endowment growth is \emph{i.i.d.}, then this economy is observationally equivalent to one in which consumers discount geometrically. We examine the effects of non-geometric subjective discount factors in an economy in which habits induce serial dependence in net-of-habit endowment growth rates.

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