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Time-Tradeoff Sequences for Analyzing Discounting and Time Inconsistency

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Author Info

  • Arthur E. Attema

    ()
    (Department of Health Policy and Management, Erasmus University, 3000 DR Rotterdam, The Netherlands)

  • Han Bleichrodt

    ()
    (Erasmus School of Economics, Erasmus University, 3000 DR Rotterdam, The Netherlands)

  • Kirsten I. M. Rohde

    ()
    (Erasmus School of Economics, Erasmus University, 3000 DR Rotterdam, The Netherlands)

  • Peter P. Wakker

    ()
    (Erasmus School of Economics, Erasmus University, 3000 DR Rotterdam, The Netherlands)

Abstract

This paper introduces time-tradeoff (TTO) sequences as a general tool to analyze intertemporal choice. We give several applications. For empirical purposes, we can measure discount functions without requiring any measurement of or assumption about utility. We can quantitatively measure time inconsistencies and simplify their qualitative tests. TTO sequences can be administered and analyzed very easily, using only pencil and paper. For theoretical purposes, we use TTO sequences to axiomatize (quasi-)hyperbolic discount functions. We demonstrate the feasibility of measuring TTO sequences in an experiment, in which we tested the axiomatizations. Our findings suggest rejections of several currently popular discount functions and call for the development of new ones. It is especially desirable that such discount functions can accommodate increasing impatience.

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File URL: http://dx.doi.org/10.1287/mnsc.1100.1219
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 56 (2010)
Issue (Month): 11 (November)
Pages: 2015-2030

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Handle: RePEc:inm:ormnsc:v:56:y:2010:i:11:p:2015-2030

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Related research

Keywords: time inconsistency; time preference; stationarity; increasing impatience; hyperbolic discounting;

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Cited by:
  1. 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.
  2. repec:hal:cesptp:halshs-00502820 is not listed on IDEAS
  3. 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.
  4. Duffy, Sean & Smith, John, 2010. "Preference for increasing wages: How do people value various streams of income?," MPRA Paper 23559, University Library of Munich, Germany.
  5. Rützler, Daniela & Sutter, Matthias & Kocher, Martin G. & Trautmann, Stefan T., 2011. "Impatience and Uncertainty: Experimental Decisions Predict Adolescents' Field Behavior," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48720, Verein für Socialpolitik / German Economic Association.
  6. Kirsten Rohde, 2010. "The hyperbolic factor: A measure of time inconsistency," Journal of Risk and Uncertainty, Springer, vol. 41(2), pages 125-140, October.
  7. Hubert De La Bruslerie & Florent Pratlong, 2012. "La valeur psychologique du temps : Une synthèse de la littérature," Post-Print halshs-00636357, HAL.
  8. Burak Can & Orhan Erdem, 2013. "Income groups and long term investment," Economics Bulletin, AccessEcon, vol. 33(4), pages 3014-3022.
  9. Michèle Cohen & Jean-Marc Tallon & Jean-Christophe Vergnaud, 2011. "An experimental investigation of imprecision attitude and its relation with risk attitude and impatience," Theory and Decision, Springer, vol. 71(1), pages 81-109, July.
  10. 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.

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