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A subjective discounted utility model

Author

Listed:
  • André Lapied

    () (GREQAM, Aix-Marseille University)

  • Olivier Renault

    () (GREQAM, Aix-Marseille University)

Abstract

Intertemporal choices involve a great heterogeneity among discount mechanisms. In order to catch such diversity, we introduce an axiomatic Subjective Discounted Utility (SDU) model based on separability assumption. The originality of the SDU model rests on the fact that decision makers discount subjective periods, namely decision weights can be described as standard discount functions of time perception. In particular, our model appears as a generalization of both exponential and hyperbolic approaches.

Suggested Citation

  • André Lapied & Olivier Renault, 2012. "A subjective discounted utility model," Economics Bulletin, AccessEcon, vol. 32(2), pages 1171-1179.
  • Handle: RePEc:ebl:ecbull:eb-12-00107
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    References listed on IDEAS

    as
    1. Chateauneuf, Alain & Rebille, Yann, 2004. "Some characterizations of non-additive multi-period models," Mathematical Social Sciences, Elsevier, vol. 48(3), pages 235-250, November.
    2. Fishburn, Peter C & Rubinstein, Ariel, 1982. "Time Preference," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 677-694, October.
    3. W. M. Gorman, 1968. "The Structure of Utility Functions," Review of Economic Studies, Oxford University Press, vol. 35(4), pages 367-390.
    4. 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.
    5. Nicolas Drouhin, 2009. "Hyperbolic discounting may be time consistent," Economics Bulletin, AccessEcon, vol. 29(4), pages 2549-2555.
    6. George Loewenstein & Drazen Prelec, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 573-597.
    7. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
    8. Bleichrodt, Han & Rohde, Kirsten I.M. & Wakker, Peter P., 2009. "Non-hyperbolic time inconsistency," Games and Economic Behavior, Elsevier, vol. 66(1), pages 27-38, May.
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    Citations

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    Cited by:

    1. André Lapied & Olivier Renault, 2012. "An Investigation of Time Consistency for Subjective Discontinued Utility," AMSE Working Papers 1210, Aix-Marseille School of Economics, Marseille, France.
    2. repec:eee:matsoc:v:87:y:2017:i:c:p:40-54 is not listed on IDEAS
    3. Peeters R.J.A.P. & Méder Z.Z. & Flesch J., 2014. "Naiveté and sophistication in dynamic inconsistency," Research Memorandum 005, Maastricht University, Graduate School of Business and Economics (GSBE).

    More about this item

    Keywords

    Discounting; Time Perception; Separability;

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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