Dynamics preferences, choice mechanisms, and welfare

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Static decision models inadequately capture the complexities of human behavior in economic contexts, particularly as they overlook the evolving nature of preferences influenced by past and future factors. This oversight can result in outcomes that diverge significantly from real-life scenarios. To address these challenges, dynamic decision models have emerged, leveraging advanced mathematical tools like optimal control theory and dynamic programming. Over the past two decades, dynamic utility models have proliferated, each presenting different constraints on how preferences are formed in an intertemporal context. However, a systematic review of this literature has been lacking. Part I of this thesis aims to address this gap by offering a comprehensive classification system that organizes studies on intertemporal choice under certainty and complete information, where individuals are aware of future preferences and choices. The survey reveals that all dynamic utility models can be seen as specific instances of universal utility models, prompting an exploration of intertemporal decision-making within this broad framework. Consequently, the findings in Part II are derived from the universal utility models, providing a cohesive understanding of the subject.