A general theory of time discounting: The reference-time theory of intertemporal choice
We develop a general theory of intertemporal choice: the reference-time theory, RT. RT is a synthesis of ideas from the hyperbolic model and subadditivity of time discounting. These models are extended to allow for a reference point for time as well as wealth. RT is able to account for all the 6 main anomalies of time discounting: gain-loss asymmetry, magnitude effect, common difference effect, delay-speedup asymmetry, apparent intransitivity of time preferences, and non-additivity of time discounting. We provide a class of utility functions compatible with RT. We show how RT can be extended to incorporate uncertainty and attribute models of intertemporal choice.
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- Ali al-Nowaihi & Sanjit Dhami, 2010. "Probability Weighting Functions," Discussion Papers in Economics 10/10, Department of Economics, University of Leicester.
- al-Nowaihi, Ali & Dhami, Sanjit, 2009.
"A value function that explains the magnitude and sign effects,"
Elsevier, vol. 105(3), pages 224-229, December.
- Ali al-Nowaihi & Sanjit Dhami, 2008. "A value function that explains the magnitude and sign effects," Discussion Papers in Economics 08/31, Department of Economics, University of Leicester.
- al-Nowaihi, Ali & Dhami, Sanjit, 2006. "A note on the Loewenstein-Prelec theory of intertemporal choice," Mathematical Social Sciences, Elsevier, vol. 52(1), pages 99-108, July.
- Ali al-Nowaihi & Sanjit Dhami, 2005. "A Note On The Loewenstein-Prelec Theory Of Intertemporal Choice," Discussion Papers in Economics 05/18, Department of Economics, University of Leicester.