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Decreasing relative impatience

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Author Info

  • Rohde, Kirsten I.M.

Abstract

Prelec (2004) showed that the Arrow-Pratt degree of convexity of the logarithm of the discount function can serve as a measure of decreasing impatience and of the corresponding time-inconsistency. In decision under risk and uncertainty the convexity of the utility function itself, not of its logarithm, has empirical meaning in terms of risk attitude. This paper introduces decreasing relative impatience, which is directly related to the degree of convexity of the discount function. By giving empirical meaning to the convexity of the discount function this paper clarifies the relations between several concepts in intertemporal choice. This paper also introduces a concept of spread seeking. Spread seeking and decreasing relative impatience are likely to have distinct underlying psychological motives, but are shown to be equivalent under discounted utility.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Psychology.

Volume (Year): 30 (2009)
Issue (Month): 6 (December)
Pages: 831-839

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Handle: RePEc:eee:joepsy:v:30:y:2009:i:6:p:831-839

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Web page: http://www.elsevier.com/locate/joep

Related research

Keywords: Intertemporal choice Decreasing impatience Decreasing relative impatience Hyperbolic discounting Consumer attitudes and behaviour;

References

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  1. Erzo G. J. Luttmer & Thomas Mariotti, 2003. "Subjective Discounting in an Exchange Economy," Journal of Political Economy, University of Chicago Press, vol. 111(5), pages 959-989, October.
  2. Harrell Chesson & W. Viscusi, 2003. "Commonalities in Time and Ambiguity Aversion for Long-Term Risks ," Theory and Decision, Springer, vol. 54(1), pages 57-71, February.
  3. O'Donoghue, Ted & Rabin, Matthew, 1997. "Doing It Now or Later," Department of Economics, Working Paper Series qt7t44m5b0, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  4. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  5. Loewenstein, George & Prelec, Drazen, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 573-97, May.
  6. Per Krusell & Anthony A Smith, Jr., 2001. "Consumption Savings Decisions with Quasi-Geometric Discounting," Levine's Working Paper Archive 625018000000000251, David K. Levine.
  7. Harris, Christopher & Laibson, David, 2001. "Dynamic Choices of Hyperbolic Consumers," Econometrica, Econometric Society, vol. 69(4), pages 935-57, July.
  8. Ariel Rubinstein, 2006. "Dilemmas of an Economic Theorist," Econometrica, Econometric Society, vol. 74(4), pages 865-883, 07.
  9. Akerlof, George A., 2001. "Behavioral Macroeconomics and Macroeconomic Behavior," Nobel Prize in Economics documents 2001-4, Nobel Prize Committee.
  10. Jane E. J. Ebert & Drazen Prelec, 2007. "The Fragility of Time: Time-Insensitivity and Valuation of the Near and Far Future," Management Science, INFORMS, vol. 53(9), pages 1423-1438, September.
  11. Selçuk Onay & Ayse Öncüler, 2007. "Intertemporal choice under timing risk: An experimental approach," Journal of Risk and Uncertainty, Springer, vol. 34(2), pages 99-121, April.
  12. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages S164-S187, February.
  13. Ariel Rubinstein, 2003. ""Economics and Psychology"? The Case of Hyperbolic Discounting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1207-1216, November.
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Cited by:
  1. Ottaviani, Cristina & Vandone, Daniela, 2011. "Impulsivity and household indebtedness: Evidence from real life," Journal of Economic Psychology, Elsevier, vol. 32(5), pages 754-761.

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