A rank-dependent utility model of uncertain lifetime

In a continuous time life cycle model of consumption with an uncertain lifetime, we use a non-parametric specification of rank-dependent utility theory to characterize the preferences of the agent. We prove that time consistency holds for a subclass of probability-weighting function, providing the foundation for a constant rate of time preference that interacts multiplicatively with the hazard rate instead of additively as in the Yaari (1965) seminal model. We calibrate both models to explain the hump in the life-cycle consumption, and show that the multiplicative model is more robust.