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Evolution of Time Preferences and Attitudes toward Risk

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  • Nick Netzer

Abstract

This paper explores a general model of the evolution and adaption of hedonic utility. It is shown that optimal utility will be increasing strongly in regions where choices have to be made often and decision mistakes have a severe impact on fitness. Several applications are suggested. In the context of intertemporal preferences, the model offers an evolutionary explanation for the existence of conflicting short- and long-run interests that lead to dynamic inconsistency. Concerning attitudes toward risk, an evolutionary explanation is given for S-shaped value functions that adjust to the decision maker's environment. (JEL D81, D83)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.99.3.937
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 99 (2009)
Issue (Month): 3 (June)
Pages: 937-55

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:3:p:937-55

Note: DOI: 10.1257/aer.99.3.937
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  1. Schelling, Thomas C, 1984. "Self-Command in Practice, in Policy, and in a Theory of Rational Choice," American Economic Review, American Economic Association, vol. 74(2), pages 1-11, May.
  2. Winston, Gordon C., 1980. "Addiction and backsliding : A theory of compulsive consumption," Journal of Economic Behavior & Organization, Elsevier, vol. 1(4), pages 295-324, December.
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  4. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
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  8. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  9. Arthur J. Robson, 2001. "The Biological Basis of Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 11-33, March.
  10. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  11. Elster, Jon, 1985. "Weakness of will and the free-rider problem," Mathematical Social Sciences, Elsevier, vol. 10(3), pages 293-294, December.
  12. Shefrin, Hersh M & Thaler, Richard H, 1988. "The Behavioral Life-Cycle Hypothesis," Economic Inquiry, Western Economic Association International, vol. 26(4), pages 609-43, October.
  13. Curry, Philip A., 2001. "Decision Making under Uncertainty and the Evolution of Interdependent Preferences," Journal of Economic Theory, Elsevier, vol. 98(2), pages 357-369, June.
  14. Partha Dasgupta & Eric Maskin, 2005. "Uncertainty and Hyperbolic Discounting," American Economic Review, American Economic Association, vol. 95(4), pages 1290-1299, September.
  15. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
  16. Larry Samuelson, 2004. "Information-Based Relative Consumption Effects," Econometrica, Econometric Society, vol. 72(1), pages 93-118, 01.
  17. Hansson, Ingemar & Stuart, Charles, 1990. "Malthusian Selection of Preferences," American Economic Review, American Economic Association, vol. 80(3), pages 529-44, June.
  18. Elster, Jon, 1985. "Weakness of Will and the Free-Rider Problem," Economics and Philosophy, Cambridge University Press, vol. 1(02), pages 231-265, October.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Netzer AER - Evolution of Time Preferences and Attitude Toward Risk
    by Liam Delaney in Geary Behaviour Centre on 2010-08-08 10:42:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  2. Philip A. Curry & John E. Roemer, 2012. "Evolutionary Stability of Kantian Optimization," Hacienda Pública Española, IEF, vol. 200(1), pages 131-146, March.
  3. Maarten Voors & Eleonora Nillesen & Philip Verwimp & Erwin Bulte & Robert Lensink & Daan van Soest, 2010. "Does Conflict affect Preferences? Results from Field Experiments in Burundi," Research Working Papers 21, MICROCON - A Micro Level Analysis of Violent Conflict.
  4. Barnea, Amir & Cronqvist, Henrik & Siegel, Stephan, 2010. "Nature or Nurture: What Determines Investor Behavior?," SIFR Research Report Series 72, Institute for Financial Research.
  5. Alger, Ingela & Cox, Donald, 2012. "The Evolution of Altruistic Preferences: Mothers versus Fathers," IAST Working Papers 12-02, Institute for Advanced Study in Toulouse (IAST), revised May 2013.
  6. Katsunori Yamada & Masayuki Sato & Yasuhiro Nakamoto, 2009. "Measurement of Social Preference from Utility-Based Choice Experiments," ISER Discussion Paper 0759, Institute of Social and Economic Research, Osaka University.
  7. Marco Castillo & Ragan Petrie & Maximo Torero, 2008. "Rationality and the Nature of the Market," Experimental Economics Center Working Paper Series 2008-12, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
  8. Giuseppe Albanese & Guido de Blasio & Paolo Sestito, 2013. "Trust and preferences: evidence from survey data," Temi di discussione (Economic working papers) 911, Bank of Italy, Economic Research and International Relations Area.
  9. Michele Berardi, 2012. "Endogenous time-varying risk aversion and asset return," Centre for Growth and Business Cycle Research Discussion Paper Series 168, Economics, The Univeristy of Manchester.
  10. Maarten J. Voors & Eleonora E. M. Nillesen & Philip Verwimp & Erwin H. Bulte & Robert Lensink & Daan P. Van Soest, 2012. "Violent Conflict and Behavior: A Field Experiment in Burundi," American Economic Review, American Economic Association, vol. 102(2), pages 941-64, April.
  11. Luis Rayo & Arthur J. Robson, 2013. "Biology and the Arguments of Utility," Levine's Working Paper Archive 786969000000000787, David K. Levine.
  12. Marc Willinger & Mohamed Ali Bchir & Carine Heitz, 2013. "Risk and time preferences under the threat of background risk: a case-study of lahars risk in central Java," Working Papers 13-08, LAMETA, Universtiy of Montpellier, revised May 2013.
  13. Jason Collins & Boris Baer & Ernst Juerg Weber, 2011. "Economic Growth And Evolution: Parental Preference For Quality And Quantity Of Offspring," Economics Discussion / Working Papers 11-05, The University of Western Australia, Department of Economics.
  14. de Farias Neto, Joao Jose, 2008. "S-shaped utility, subprime crash and the black swan," MPRA Paper 12122, University Library of Munich, Germany.

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