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An Experimental Analysis of Intertemporal Allocation Behavior

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

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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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
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102888

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  1. Loewenstein, George & Thaler, Richard H, 1989. "Intertemporal Choice," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 181-93, Fall.
  2. Reinhard Selten & Abdolkarim Sadrieh & Klaus Abbink, 1999. "Money Does Not Induce Risk Neutral Behavior, but Binary Lotteries Do even Worse," Theory and Decision, Springer, vol. 46(3), pages 213-252, June.
  3. Gary Gigliotti & Barry Sopher, 1997. "Violations of Present-Value Maximization in Income Choice," Theory and Decision, Springer, vol. 43(1), pages 45-69, July.
  4. 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.
  5. Harrison, Glenn W, 1994. "Expected Utility Theory and the Experimentalists," Empirical Economics, Springer, vol. 19(2), pages 223-53.
  6. Anderhub,Vital & M�ller,Rudolf & Schmidt,Carsten, 2001. "Design and Evaluation of an Economic Experiment via the Internet," Research Memorandum 016, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
  7. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
  8. George Loewenstein & Richard H Thaler, 2003. "Anomalies: Intertemporal Choice," Levine's Working Paper Archive 618897000000000784, David K. Levine.
  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. 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.
  11. 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.
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