A relationship between risk and time preferences

Arbeitspapier

This paper investigates a general relationship between risk and time preferences. I consider a decision maker who chooses between consumption of a particular prize in one period and a different prize in another period. The individual believes that today's good is certain, and that, as the promised date for a future good becomes increasingly distant, the probability of his consuming the good decreases. Under these assumptions, this paper shows that the individuals exhibits the common ratio effect, the certainty effect, and the expected utility if and only if he discounts hyperbolically, quasi-hyperbolically and exponentially, respectively.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 1477

Classification and Topics

• Classification: Wirtschaft
• Subject: Allais paradox ; hyperbolic discounting ; Entscheidung bei Risiko ; Zeitpräferenz ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Saito, Kota
• Event: Veröffentlichung
• (who): Northwestern University, Kellogg School of Management, Center for Mathematical Studies in Economics and Management Science
• (where): Evanston, IL
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/59664
• Last update: 10.03.2025, 11:43 AM CET