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Anomalies In Intertemporal Choice?

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Author Info

  • Anke Gerber

    (University of Zurich and Swiss Banking Institute)

  • Kirsten I.M. Rohde

    (Erasmus University, Department of Applied Economics, The Netherlands)

Abstract

This paper argues that observations of non-stationary choice behavior need not necessarily imply specific properties of the individual’s discount function. As we show, the observed “anomalies” in intertemporal choice can alternatively be explained by an individual’s perception of the risk that is involved whenever an outcome is to be received in the future. This risk may concern the size of the actual outcome or the endowment consumption stream to which the outcome is added. Both types of uncertainty naturally appear in the context of intertemporal choice and both are difficult to control in experiments. We show how relative degrees of changes in risk over time can predict choices.

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Bibliographic Info

Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 07-12.

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Length: 34 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:chf:rpseri:rp0712

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Web page: http://www.SwissFinanceInstitute.ch
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Related research

Keywords: Hyperbolic Discounting; Decreasing Impatience; Increasing impatience; Risk; Magnitude Effect; Gain-Loss Asymmetry;

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Cited by:
  1. Stefania Albanesi & Claudia Olivetti, 2006. "Gender roles and technological progress," 2006 Meeting Papers 411, Society for Economic Dynamics.

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