Information Processing with Recursive Utility : Some Intriguing Results

We study information processing in a simple endowment economy where the mean consumption growth rate are governed by a hidden state variable and agents have recursive preferences. We show that for typical parameter values, there is a strong incentive to commit to ignoring future information on the state of the economy, but that such commitment raises time - inconsistency problems. We estimate the model on postwar US data and find that the representative consumer can achieve a utility gain equivalent to a 20% increase in lifetime consumption simply by not paying attention to the state of the economy

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Year of publication:	[2008]
Authors:	D'Addona, Stefano
Other Persons:	Brevik, Frode (contributor)
Publisher:	[2008]: [S.l.] : SSRN
Subject:	Konsumentenverhalten \| Consumer behaviour \| Risikoaversion \| Risk aversion \| Agentenbasierte Modellierung \| Agent-based modeling \| Zeitkonsistenz \| Time consistency \| Theorie \| Theory

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