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An Experimental Analysis of Intertemporal Allocation Behavior

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Author Info

  • Vital Anderhub
  • Werner Gäuth
  • Wieland Mäuller
  • Martin Strobel

Abstract

If the future is uncertain, optimal intertemporal decisions rely on anticipating one's own optimal future behavior as is typical in dynamic programming. Our aim is to detect experimentally stylized facts about intertemporal decision making in a rich stochastic environment. Compared to previous experimental studies our experimental design is more complex since the time horizon is uncertain and termination probabilities have to be updated. In particular the decision task is non-stationary as in real life which seriously complicates the task of diagnosing behavioral regularities. In this study we give some illustrative results and provide some general perspectives. Our main result is that subjects'reaction to information about termination probablilities are qualitatively correct. Copyright Kluwer Academic Publishers 2000

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File URL: http://hdl.handle.net/10.1023/A:1026589319018
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Bibliographic Info

Article provided by Springer in its journal Experimental Economics.

Volume (Year): 3 (2000)
Issue (Month): 2 (October)
Pages: 137-152

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Handle: RePEc:kap:expeco:v:3:y:2000:i:2:p:137-152

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Web page: http://www.springerlink.com/link.asp?id=102888

Related research

Keywords: intertemporal allocation behavior;

References

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  1. George Loewenstein & Richard H Thaler, 2003. "Anomalies: Intertemporal Choice," Levine's Working Paper Archive 618897000000000784, David K. Levine.
  2. Selten, Reinhard & Joachim Buchta, 1994. "Experimental Sealed Bid First Price Auctions with Directly Observed Bid Functions," Discussion Paper Serie B 270, University of Bonn, Germany.
  3. Anderhub, Vital & Güth, Werner & Knust, Florian, 2000. "On saving and investing: An experimental study of intertemporal decision making in a complex stochastic environment," SFB 373 Discussion Papers 2000,2, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  4. Gary Gigliotti & Barry Sopher, 1996. "Violations of Present-value Maximization in Income Choice," Departmental Working Papers 199624, Rutgers University, Department of Economics.
  5. Selten, Reinhard & Abdolkarim Sadrieh & Klaus Abbink, 1995. "Money does Not Induce Risk Neutral Behavior, but Binary Lotteries Do even Worse," Discussion Paper Serie B 343, University of Bonn, Germany.
  6. Harrison, Glenn W, 1994. "Expected Utility Theory and the Experimentalists," Empirical Economics, Springer, vol. 19(2), pages 223-53.
  7. Stephen Johnson & Laurence J. Kotlikoff & William Samuelson, 1987. "Can People Compute? An Experimental Test of the Life Cycle Consumption Model," NBER Working Papers 2183, National Bureau of Economic Research, Inc.
  8. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
  9. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
  10. repec:wop:humbsf:2000-2 is not listed on IDEAS
  11. repec:wop:humbsf:1998-57 is not listed on IDEAS
  12. Loewenstein, George & Thaler, Richard H, 1989. "Intertemporal Choice," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 181-93, Fall.
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Citations

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Cited by:
  1. Müller, Wieland, 1999. "Strategies, heuristics and the relevance of risk aversion in a dynamic decision problem," SFB 373 Discussion Papers 1999,61, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  2. V. Anderhub & R. Müller & C. Schmidt, 1998. "Design and Evaluation of an Economic Experiment via the Internet," SFB 373 Discussion Papers 1998,69, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  3. Fischbacher, Urs & Thöni, Christian, 2008. "Excess entry in an experimental winner-take-all market," Journal of Economic Behavior & Organization, Elsevier, vol. 67(1), pages 150-163, July.
  4. Werner Güth, 2009. "Optimal gelaufen, einfach zufrieden oder unüberlegt gehandelt? Zur Theorie (un)eingeschränkt rationalen Entscheidens," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 10(s1), pages 75-100, 05.
  5. Vital Anderhuba & Dennis A. V. Dittrich & Werner Güth & Nadege Marchandd, . "Interpersonal allocation behavior in a household saving experiment," Papers on Strategic Interaction 2002-02, Max Planck Institute of Economics, Strategic Interaction Group.

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