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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. Hansson, Ingemar & Stuart, Charles, 1990. "Malthusian Selection of Preferences," American Economic Review, American Economic Association, vol. 80(3), pages 529-44, June.
  2. 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.
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  9. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
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  11. Elster, Jon, 1985. "Weakness of will and the free-rider problem," Mathematical Social Sciences, Elsevier, vol. 10(3), pages 293-294, December.
  12. Larry Samuelson, 2004. "Information-Based Relative Consumption Effects," Econometrica, Econometric Society, vol. 72(1), pages 93-118, 01.
  13. Drew Fudenberg & David K. Levine, 2006. "A Dual Self Model of Impulse Control," Harvard Institute of Economic Research Working Papers 2112, Harvard - Institute of Economic Research.
  14. W. Pesendorfer & F. Gul, 1999. "Temptation and Self-Control," Princeton Economic Theory Papers 99f1, Economics Department, Princeton University.
  15. Tversky, Amos & Kahneman, Daniel, 1992. " Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
  16. Arthur J. Robson, 2001. "The Biological Basis of Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 11-33, March.
  17. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
  18. Larry Samuelson & Arthur J. Robson, 2007. "The Evolution of Intertemporal Preferences," American Economic Review, American Economic Association, vol. 97(2), pages 496-500, May.
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  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
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