IDEAS home Printed from
   My bibliography  Save this paper

Allais meets Strotz: Remarks on the relation between Present Bias and the Certainty Effect


  • Chakraborty, Anujit
  • Halevy, Yoram


The paper establishes a tight relation between non-standard behaviors in the domains of risk and time by considering a decision maker with non-expected utility preferences who believes that only present consumption is certain while any future consumption is uncertain. We provide the first complete characterization of the two-way relations between i) certainty effect and present bias, and, ii) common ratio effect and the common difference effect. A corollary to our results is that hyperbolic discounting implies the Common Ratio Effect and that quasi-hyperbolic discounting implies the Certainty Effect.

Suggested Citation

  • Chakraborty, Anujit & Halevy, Yoram, 2015. "Allais meets Strotz: Remarks on the relation between Present Bias and the Certainty Effect," working papers yoram_halevy-2015-7, Vancouver School of Economics, revised 03 Nov 2016.
  • Handle: RePEc:ubc:pmicro:yoram_halevy-2015-7

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
    2. Yoram Halevy, 2008. "Strotz Meets Allais: Diminishing Impatience and the Certainty Effect," American Economic Review, American Economic Association, vol. 98(3), pages 1145-1162, June.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:kap:theord:v:83:y:2017:i:3:d:10.1007_s11238-017-9603-2 is not listed on IDEAS

    More about this item


    hyperbolic discounting; present bias; non-expected utility; prospect theory; common ratio effect;

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ubc:pmicro:yoram_halevy-2015-7. 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: (Maureen Chin). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.