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Comparative impatience under random discounting

Author

Listed:
  • Youichiro Higashi

    (Okayama University)

  • Kazuya Hyogo

    (Ryukoku University)

  • Norio Takeoka

    (Yokohama National University)

  • Hiroyuki Tanaka

    (Kyoto University)

Abstract

The random discounting model has been used as a tractable model which is consistent with preference for flexibility. By taking Goldman (J. Econ. Theory 9:203–222, 1974) as an example, we illustrate that under random discounting, the average time preference and preference for flexibility may be conflicting to each other and their mixed effect contributes to revealed impatience. To obtain sharp results in comparative statics, we ask under what kind of probability shifts on discount factors, it is possible to say that one agent always exhibits a more impatient choice than the other even when both agents have flexibility concern. We provide a behavioral definition of impatience comparisons and identify that the relative degree of impatience is measured as a probability shift of a random discount factor in the monotone likelihood ratio order.

Suggested Citation

  • Youichiro Higashi & Kazuya Hyogo & Norio Takeoka & Hiroyuki Tanaka, 2017. "Comparative impatience under random discounting," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(3), pages 621-651, March.
    • Handle: RePEc:spr:joecth:v:63:y:2017:i:3:d:10.1007_s00199-015-0950-3
    DOI: 10.1007/s00199-015-0950-3
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    References listed on IDEAS

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    Cited by:

    1. John Stachurski & Junnan Zhang, 2019. "Dynamic Programming with State-Dependent Discounting," Papers 1908.08800, arXiv.org, revised Oct 2020.
    2. Lu, Jay & Saito, Kota, 2018. "Random intertemporal choice," Journal of Economic Theory, Elsevier, vol. 177(C), pages 780-815.

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    More about this item

    Keywords

    Time preference; Preference for flexibility; Comparative impatience; Random discounting; Monotone likelihood ratio order;
    All these keywords.

    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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