Working Paper

Time-Consistent Individuals, Time-Inconsistent Households

Abstract: I present a model of consumption and savings for a multi-person household in which members are imperfectly altruistic, derive utility from both private and shared public goods, and share wealth. I show that, despite having standard exponential time preferences, the household is time-inconsistent: members save too little and overspend on private consumption goods. The household remains time-inconsistent even when members save separately, because the possibility of voluntary transfers or joint contribution to the public good preserves the dynamic commons problem. The household will choose to share wealth when the risk sharing benefits outweigh the utility cost of overconsumption.

JEL Classification: D13; D91; D14; G41; G51;

https://doi.org/10.21799/frbp.wp.2026.20

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2026-04-13

Number: 26-20