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Non-hyperbolic time inconsistency

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Author Info

  • Bleichrodt, Han
  • Rohde, Kirsten I.M.
  • Wakker, Peter P.

Abstract

The commonly used hyperbolic and quasi-hyperbolic discount functions have been developed to accommodate decreasing impatience, which is the prevailing empirical finding in intertemporal choice, in particular for aggregate behavior. However, these discount functions do not have the flexibility to accommodate increasing impatience or strongly decreasing impatience. This lack of flexibility is particularly disconcerting for fitting data at the individual level, where various patterns of increasing impatience and strongly decreasing impatience will occur for a significant fraction of subjects. This paper presents discount functions with constant absolute (CADI) or constant relative (CRDI) decreasing impatience that can accommodate any degree of decreasing or increasing impatience. In particular, they are sufficiently flexible for analyses at the individual level. The CADI and CRDI discount functions are the analogs of the well-known CARA and CRRA utility functions for decision under risk.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 66 (2009)
Issue (Month): 1 (May)
Pages: 27-38

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Handle: RePEc:eee:gamebe:v:66:y:2009:i:1:p:27-38

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Hyperbolic discounting CADI discounting CRDI discounting Decreasing impatience Time preference;

References

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Citations

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Cited by:
  1. André Lapied & Olivier Renault, 2012. "A subjective discounted utility model," Economics Bulletin, AccessEcon, vol. 32(2), pages 1171-1179.
  2. Hammond, Peter J & Zank, Horst, 2013. "Rationality and Dynamic Consistency under Risk and Uncertainty," The Warwick Economics Research Paper Series (TWERPS) 1033, University of Warwick, Department of Economics.
  3. Anke Gerber & Kirsten I.M. Rohde, 2009. "Eliciting Discount Functions when Baseline Consumption changes over Time," Tinbergen Institute Discussion Papers 09-103/1, Tinbergen Institute, revised 24 Feb 2010.
  4. Matthias Sutter & Martin G. Kocher & Daniela Ruetzler & Stefan T. Trautmann, 2010. "Impatience and uncertainty: Experimental decisions predict adolescents? field behavior," Working Papers 2010-29, Faculty of Economics and Statistics, University of Innsbruck.
  5. André Lapied & Olivier Renault, 2012. "An Investigation of Time Consistency for Subjective Discontinued Utility," Working Papers halshs-00793174, HAL.
  6. Mohammed Abdellaoui & Han Bleichrodt & Olivier l’Haridon, 2013. "Sign-dependence in intertemporal choice," Journal of Risk and Uncertainty, Springer, vol. 47(3), pages 225-253, December.
  7. Thomas Epper & Helga Fehr-Duda & Renate Schubert, 2011. "Energy-Using Durables: The Role of Time Discounting in Investment Decisions," IED Working paper 11-16, IED Institute for Environmental Decisions, ETH Zurich.
  8. Eike B. Kroll & Bodo Vogt, 2008. "Loss Aversion for time: An experimental investigation of time preferences," FEMM Working Papers 08027, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  9. Han Bleichrodt & Rogier J. D. Potter van Loon & Kirsten I. M. Rohde & Peter P. Wakker, 2013. "A Criticism of Doyle's survey of time preference: A correction regarding the CRDI and CADI families," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(5), pages 630-631, September.
  10. John R. Doyle, 2013. "Survey of time preference, delay discounting models," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(2), pages 116-135, March.
  11. Laurent Denant-Boèmont & Enrico Diecidue & Olivier L'Haridon, 2013. "Patience and Time Consistency in Collective Decisions," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201329, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  12. de-Paz, Albert & Marín-Solano, Jesús & Navas, Jorge, 2013. "A consumption–investment problem with heterogeneous discounting," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 221-232.
  13. Gerber, Anke & Rohde, Kirsten I.M., 2010. "Risk and preference reversals in intertemporal choice," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 654-668, December.
  14. Mohammed Abdellaoui & Olivier l'Haridon & Corina Paraschiv, 2013. "Do Couples Discount Future Consequences Less than Individuals?," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201320, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  15. Wojciech Rybicki, 2012. "Discounting and ideas of intergenerational equity and sustainability," Operations Research and Decisions, Wroclaw University of Technology, Institute of Organization and Management, vol. 1, pages 63-84.

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