Intertemporal choice under timing risk: An experimental approach
This paper investigates how individuals evaluate delayed outcomes with risky realization times. Under the discounted expected utility (DEU) model, such evaluations depend only on intertemporal preferences. We obtain several testable hypotheses using the DEU model as a benchmark and test these hypotheses in three experiments. In general, our results show that the DEU model is a poor predictor of intertemporal choice behavior under timing risk. We found that individuals are averse to timing risk and that they evaluate timing lotteries in a rank-dependent fashion. The main driver of timing risk aversion is nothing but probabilistic risk aversion that stems from the nonlinear treatment of probabilities. Copyright Springer Science+Business Media, LLC 2007
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin Ahlbrecht & Martin Weber, 1997. "An Empirical Study on Intertemporal Decision Making Under Risk," Management Science, INFORMS, vol. 43(6), pages 813-826, June.
- Stylianos Perrakis & Izzet Sahin, 1976. "On Risky Investments with Random Timing of Cash Returns and Fixed Planning Horizon," Management Science, INFORMS, vol. 22(7), pages 799-809, March.
- Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
- 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.
- Paul A. Samuelson, 1937. "A Note on Measurement of Utility," Review of Economic Studies, Oxford University Press, vol. 4(2), pages 155-161.
- Chew, Soo Hong & Ho, Joanna L, 1994. "Hope: An Empirical Study of Attitude toward the Timing of Uncertainty Resolution," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 267-88, May.
- Leclerc, France & Schmitt, Bernd H & Dube, Laurette, 1995. " Waiting Time and Decision Making: Is Time like Money?," Journal of Consumer Research, Oxford University Press, vol. 22(1), pages 110-19, June.
- Tjalling C. Koopmans, 1959. "Stationary Ordinal Utility and Impatience," Cowles Foundation Discussion Papers 81, Cowles Foundation for Research in Economics, Yale University.
- Partha Dasgupta & Eric Maskin, 2004.
"Uncertainty and Hyperbolic Discounting,"
Economics Working Papers
0023, Institute for Advanced Study, School of Social Science.
- Harrell Chesson & W. Viscusi, 2003. "Commonalities in Time and Ambiguity Aversion for Long-Term Risks ," Theory and Decision, Springer, vol. 54(1), pages 57-71, February.
- Mossin, Jan, 1969. "A Note on Uncertainty and Preferences in a Temporal Context," American Economic Review, American Economic Association, vol. 59(1), pages 172-74, March.
- Quiggin, John, 1982. "A theory of anticipated utility," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 323-343, December.
- Tversky, Amos & Kahneman, Daniel, 1992. "Advances in Prospect Theory: Cumulative Representation of Uncertainty," Journal of Risk and Uncertainty, Springer, vol. 5(4), pages 297-323, October.
- Stylianos Perrakis & Claude Henin, 1974. "The Evaluation of Risky Investments with Random Timing of Cash Returns," Management Science, INFORMS, vol. 21(1), pages 79-86, September.
- 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.
- George Wu & Richard Gonzalez, 1996. "Curvature of the Probability Weighting Function," Management Science, INFORMS, vol. 42(12), pages 1676-1690, December.
- Drazen Prelec, 1998. "The Probability Weighting Function," Econometrica, Econometric Society, vol. 66(3), pages 497-528, May.
- Uri Benzion & Amnon Rapoport & Joseph Yagil, 1989. "Discount Rates Inferred from Decisions: An Experimental Study," Management Science, INFORMS, vol. 35(3), pages 270-284, March.
- Spence, Michael & Zeckhauser, Richard J, 1972. "The Effect of the Timing of Consumption Decisions and the Resolution of Lotteries on the Choice of Lotteries," Econometrica, Econometric Society, vol. 40(2), pages 401-03, March.
When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:34:y:2007:i:2:p:99-121. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.