INTERTEMPORAL CONSUMPTION WITH ANTICIPATING, REMEMBERING, AND EXPERIENCING SELVES

Abstract

We study intertemporal choice through a novel and flexible framework that accounts for savoring of future consumption and memories of past consumption. The model uses standard intertemporal budget constraints but enriches preference structures with utility from anticipation, remembering, and experience. We also present an internal commitment mechanism that ensures dynamic consistency. We provide a revealed preference characterization of this model and apply it to quarterly consumption data from Spanish households. Utility from anticipation is important—and time inconsistency not strictly needed—to rationalize consumption patterns in the data.