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Recent Developments in Intertemporal Choice Theory

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  • Takeoka, Norio

Abstract

In economics, the exponential discounting has been used as a standard model for intertemporal choice. However, experimental and empirical studies report numerous anomalies for the exponential discounting model. This study overviews how the intertemporal choice model has been developed to accommodate those anomalies such as the common difference effect, the magnitude effect, separation of attitudes between risk and intertemporal substitution, the equity premium puzzle and the risk-free rate puzzle, additive separability across time, and attitudes toward time lotteries. In particular, we will explain in detail the authorʼs research （Noor and Takeoka（2020））, called the costly empathy model, which is motivated to accommodate the magnitude effect.

Suggested Citation

  • Takeoka, Norio, 2021. "Recent Developments in Intertemporal Choice Theory," Economic Review, Hitotsubashi University, vol. 72(2), pages 140-158, April.
    • Handle: RePEc:hit:ecorev:v:72:y:2021:i:2:p:140-158
    DOI: 10.15057/71668
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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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