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A note on the Loewenstein-Prelec theory of intertemporal choice

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  • al-Nowaihi, Ali
  • Dhami, Sanjit

Abstract

In one of the major contributions to behavioral economics, Loewenstein and Prelec (1992) set the foundations for the behavioral approach to decision making over time. We correct a number of errors in Loewenstein and Prelec (1992). Furthermore, we provide a correct, more direct and simpler derivation of their generalized hyperbolic discounting formula that has formed the basis of much recent work on temporal choice.

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Bibliographic Info

Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 52 (2006)
Issue (Month): 1 (July)
Pages: 99-108

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Handle: RePEc:eee:matsoc:v:52:y:2006:i:1:p:99-108

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Web page: http://www.elsevier.com/locate/inca/505565

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References

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  1. Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
  2. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
  3. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  4. 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.
  5. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
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Cited by:
  1. Ali al-Nowaihi & Sanjit Dhami, 2008. "A general theory of time discounting: The reference-time theory of intertemporal choice," Discussion Papers in Economics 08/34, Department of Economics, University of Leicester.
  2. Ali al-Nowaihi & Sanjit Dhami, 2013. "Foundations and Properties of Time Discount Functions," Discussion Papers in Economics 13/27, Department of Economics, University of Leicester.
  3. Ali al-Nowaihi & Sanjit Dhami, 2013. "A Theory of Reference Time," Discussion Papers in Economics 13/26, Department of Economics, University of Leicester.
  4. Marc Scholten & Daniel Read, 2006. "Beyond discounting: the tradeoff model of intertemporal choice," LSE Research Online Documents on Economics 22710, London School of Economics and Political Science, LSE Library.
  5. Pushpa, Rathie & Carlos, Radavelli & Sergio, Da Silva, 2006. "Sharpening Intertemporal Prospect Theory," MPRA Paper 1849, University Library of Munich, Germany.
  6. Ali al-Nowaihi & Sanjit Dhami, 2006. "A Note On Generalized Hyperbolic Discounting," Discussion Papers in Economics 06/10, Department of Economics, University of Leicester.
  7. Ali al-Nowaihi & Sanjit Dhami, 2007. "Explaining the anomalies of the exponential discounted utility model," Discussion Papers in Economics 07/09, Department of Economics, University of Leicester.
  8. Lidia Ceriani & Chiara Gigliarano, 2011. "An inter-temporal relative deprivation index," Working Papers 237, ECINEQ, Society for the Study of Economic Inequality.
  9. Ali al-Nowaihi & Sanjit Dhami, 2007. "Increasing elasticity of the value function in the Loewenstein-Prelec theory of intertemporal choice," Discussion Papers in Economics 07/13, Department of Economics, University of Leicester.
  10. Strohhecker, Jürgen & Größler, Andreas, 2013. "Do personal traits influence inventory management performance?—The case of intelligence, personality, interest and knowledge," International Journal of Production Economics, Elsevier, vol. 142(1), pages 37-50.
  11. Jouini, Elyès & Napp, Clotilde, 2008. "Behavioral biases and the representative agent," Economics Papers from University Paris Dauphine 123456789/6511, Paris Dauphine University.

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