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An Empirical Study on Intertemporal Decision Making Under Risk

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Author Info

  • Martin Ahlbrecht

    (Lehrstuhl für ABWL, Finanzwirtschaft, insbesondere Bankbetriebslehre, Universität Mannheim, 68131 Mannheim, Germany)

  • Martin Weber

    (Lehrstuhl für ABWL, Finanzwirtschaft, insbesondere Bankbetriebslehre, Universität Mannheim, 68131 Mannheim, Germany)

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    Abstract

    This study compares time preference in the cases of certainty and risk. We analyze both matching and choice behavior. We find that violations of the stationarity axiom are restricted to matching behavior, both for certainty and risk. We also compare the discounting of certain and risky outcomes as well as the discounting of gains and losses. In matching tasks, certain outcomes are discounted more than risky ones. We could not confirm these results in a choice task. Gains and losses are not found to be discounted at different rates.

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    File URL: http://dx.doi.org/10.1287/mnsc.43.6.813
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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 43 (1997)
    Issue (Month): 6 (June)
    Pages: 813-826

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    Handle: RePEc:inm:ormnsc:v:43:y:1997:i:6:p:813-826

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    Related research

    Keywords: experimental study; behavioral anomalies; time preference;

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    Citations

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    Cited by:
    1. 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.
    2. Read, Daniel & Roelofsma, Peter H. M. P., 2003. "Subadditive versus hyperbolic discounting: A comparison of choice and matching," Organizational Behavior and Human Decision Processes, Elsevier, vol. 91(2), pages 140-153, July.
    3. 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.
    4. Daniel Read & Mara Airoldi & G Loewe, 2005. "Intertemporal tradeoffs priced in interest rates and amounts: a study of method variance," LSE Research Online Documents on Economics 19823, London School of Economics and Political Science, LSE Library.
    5. Alexander Groves, 2013. "Identifying What is tempting," Working Papers ECARES 2013-41, ULB -- Universite Libre de Bruxelles.
    6. Keith Coble & Jayson Lusk, 2010. "At the nexus of risk and time preferences: An experimental investigation," Journal of Risk and Uncertainty, Springer, vol. 41(1), pages 67-79, August.
    7. Uri Benzion & Jan Krahnen & Tal Shavit, 2011. "Subjective evaluation of delayed risky outcomes for buying and selling positions: the behavioral approach," Annals of Finance, Springer, vol. 7(2), pages 247-265, May.
    8. Huber, Joel & Ariely, Dan & Fischer, Gregory, 2002. "Expressing Preferences in a Principal-Agent Task: A Comparison of Choice, Rating, and Matching," Organizational Behavior and Human Decision Processes, Elsevier, vol. 87(1), pages 66-90, January.
    9. Takeuchi, Kan, 2011. "Non-parametric test of time consistency: Present bias and future bias," Games and Economic Behavior, Elsevier, vol. 71(2), pages 456-478, March.
    10. Weber, Bethany J. & Chapman, Gretchen B., 2005. "The combined effects of risk and time on choice: Does uncertainty eliminate the immediacy effect? Does delay eliminate the certainty effect?," Organizational Behavior and Human Decision Processes, Elsevier, vol. 96(2), pages 104-118, March.
    11. Shavit, Tal & Benzion, Uri & Shapir, Offer Moshe & Galil, Koresh, 2013. "Are time preferences for risky outcomes, riskless outcomes and commodities really different?," Economics Letters, Elsevier, vol. 118(3), pages 512-514.
    12. 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.
    13. David J. Hardisty & Katherine F. Thompson & David H. Krantz & Elke U. Weber, 2013. "How to measure time preferences: An experimental comparison of three methods," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(3), pages 236-249, May.
    14. Thomas Epper & Helga Fehr-Duda & Adrian Bruhin, 2011. "Viewing the future through a warped lens: Why uncertainty generates hyperbolic discounting," Journal of Risk and Uncertainty, Springer, vol. 43(3), pages 169-203, December.
    15. Normann, Marcel & Langer, Thomas, 2001. "Altersvorsorge, Konsumwunsch und mangelnde Selbstdisziplin: Zur Relevanz deskriptiver Theorien für die Gestaltung von Altersvorsorgeprodukten," Sonderforschungsbereich 504 Publications 01-40, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
    16. Huang, Yeu-Shiang & Hsu, Chao-Ze, 2008. "An anticipative hyperbolic discount utility on intertemporal decision making," European Journal of Operational Research, Elsevier, vol. 184(1), pages 281-290, January.
    17. van der Pol, Marjon & Cairns, John, 2002. "A comparison of the discounted utility model and hyperbolic discounting models in the case of social and private intertemporal preferences for health," Journal of Economic Behavior & Organization, Elsevier, vol. 49(1), pages 79-96, September.
    18. Lisa Anderson & Sarah Stafford, 2009. "Individual decision-making experiments with risk and intertemporal choice," Journal of Risk and Uncertainty, Springer, vol. 38(1), pages 51-72, February.

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