Intertemporal consumer choice

Discounted utility


Time inconsistency (hyperbolic discounting). again, this should mirror ai. page overview if necessary. call it that?

Intertemporal budget constraint

Budget constraint


\(W_t\) is wealth endowment at time \(T\).

The Euler equation

If we have exponential discounting we have:

\(U_T=E[ \sum_{t=T}^\infty (1+\delta )^t U(C_t) ]\)

The first-order conditions give us:


The Euler equation with liquidity constraints


The Euler equation with continuous time

Marginal propensity to consume


Switching costs

Household finance

Household wealth and liquidity

Hold cash, equity, bonds, mortgages.


Fixed and variable rates

Expense and income timing


Elasticity of intertemporal substitution

Habit formation

Different utility function.

Durable goods

Can wait to purchase. depends on expected prices in future.

Buying or owning

production of other commodities. house produces rentable space eg if you own house, you have rentable space each period.

depreciation? 1 for something like rent, maybe 0.01 for long term asset