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A Note On The Loewenstein-Prelec Theory Of Intertemporal Choice

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  • Ali al-Nowaihi

    ()

  • Sanjit Dhami

    ()

Abstract

In one of the major contributions to behavioral economics, Loewenstein and Prelec (1992) set the foundations for the behavioral approach to decision making over time. We correct a number of errors in Loewenstein and Prelec (1992). Furthermore, we provide a correct, more direct and simpler derivation of their generalized hyperbolic discounting formula that has formed the basis of much recent work on temporal choice.

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File URL: http://www.le.ac.uk/economics/research/RePEc/lec/leecon/dp05-18.pdf
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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 05/18.

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Date of creation: Jul 2005
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Handle: RePEc:lec:leecon:05/18

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Postal: Department of Economics University of Leicester, University Road. Leicester. LE1 7RH. UK
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Web page: http://www2.le.ac.uk/departments/economics
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Keywords: Anomalies of the DU model; Intertemporal choice; Generalized hyperbolic discounting;

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References

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  1. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 263-91, March.
  2. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, Elsevier, vol. 8(3), pages 201-207.
  3. Loewenstein, George & Prelec, Drazen, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 107(2), pages 573-97, May.
  4. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  5. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
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Cited by:
  1. Ali al-Nowaihi & Sanjit Dhami, 2007. "Increasing elasticity of the value function in the Loewenstein-Prelec theory of intertemporal choice," Discussion Papers in Economics, Department of Economics, University of Leicester 07/13, Department of Economics, University of Leicester.
  2. Ali al-Nowaihi & Sanjit Dhami, 2006. "A Note On Generalized Hyperbolic Discounting," Discussion Papers in Economics, Department of Economics, University of Leicester 06/10, Department of Economics, University of Leicester.
  3. Ali al-Nowaihi & Sanjit Dhami, 2013. "A Theory of Reference Time," Discussion Papers in Economics, Department of Economics, University of Leicester 13/26, Department of Economics, University of Leicester.
  4. Strohhecker, Jürgen & Größler, Andreas, 2013. "Do personal traits influence inventory management performance?—The case of intelligence, personality, interest and knowledge," International Journal of Production Economics, Elsevier, Elsevier, vol. 142(1), pages 37-50.
  5. Ali al-Nowaihi & Sanjit Dhami, 2007. "Explaining the anomalies of the exponential discounted utility model," Discussion Papers in Economics, Department of Economics, University of Leicester 07/09, Department of Economics, University of Leicester.
  6. Ali al-Nowaihi & Sanjit Dhami, 2013. "Foundations and Properties of Time Discount Functions," Discussion Papers in Economics, Department of Economics, University of Leicester 13/27, Department of Economics, University of Leicester.
  7. Pushpa, Rathie & Carlos, Radavelli & Sergio, Da Silva, 2006. "Sharpening Intertemporal Prospect Theory," MPRA Paper 1849, University Library of Munich, Germany.
  8. Ali al-Nowaihi & Sanjit Dhami, 2008. "A general theory of time discounting: The reference-time theory of intertemporal choice," Discussion Papers in Economics, Department of Economics, University of Leicester 08/22, Department of Economics, University of Leicester.
  9. Jouini, Elyès & Napp, Clotilde, 2008. "Behavioral biases and the representative agent," Economics Papers from University Paris Dauphine 123456789/6511, Paris Dauphine University.
  10. Marc Scholten & Daniel Read, 2006. "Beyond discounting: the tradeoff model of intertemporal choice," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 22710, London School of Economics and Political Science, LSE Library.
  11. Lidia Ceriani & Chiara Gigliarano, 2011. "An inter-temporal relative deprivation index," Working Papers 237, ECINEQ, Society for the Study of Economic Inequality.

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