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Strotz Meets Allais: Diminishing Impatience and the Certainty Effect: Comment

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  • Kota Saito

Abstract

Halevy (2008) states the equivalence between diminishing impatience (i.e., quasi-hyperbolic discounting) and the common ratio effect. The present paper shows that one way of the equivalence is false and shows the correct and general relationships: diminishing impatience is equivalent to the certainty effect and that strong diminishing impatience (i.e., hyperbolic discounting) is equivalent to the common ratio effect. JEL: D81

Suggested Citation

  • Kota Saito, 2011. "Strotz Meets Allais: Diminishing Impatience and the Certainty Effect: Comment," American Economic Review, American Economic Association, vol. 101(5), pages 2271-2275, August.
    • Handle: RePEc:aea:aecrev:v:101:y:2011:i:5:p:2271-75
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    References listed on IDEAS

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    1. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    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.
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    Citations

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    Cited by:

    1. Dorian Jullien, 2016. "Under Uncertainty, Over Time and Regarding Other People: Rationality in 3D," GREDEG Working Papers 2016-20, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    2. Christopher P. Chambers & Federico Echenique & Alan D. Miller, 2023. "Decreasing Impatience," American Economic Journal: Microeconomics, American Economic Association, vol. 15(3), pages 527-551, August.
    3. Chakraborty, Anujit & Halevy, Yoram, 2015. "Allais meets Strotz: Remarks on the relation between Present Bias and the Certainty Effect," Microeconomics.ca working papers yoram_halevy-2015-7, Vancouver School of Economics, revised 03 Nov 2016.
    4. Adriani, Fabrizio & Sonderegger, Silvia, 2020. "Optimal similarity judgments in intertemporal choice (and beyond)," Journal of Economic Theory, Elsevier, vol. 190(C).
    5. Thomas Epper & Helga Fehr-Duda, 2012. "The missing link: unifying risk taking and time discounting," ECON - Working Papers 096, Department of Economics - University of Zurich, revised Oct 2018.
    6. Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2016. "A life-cycle model with ambiguous survival beliefs," Journal of Economic Theory, Elsevier, vol. 162(C), pages 137-180.
    7. Daniele Pennesi, 2017. "Uncertain discount and hyperbolic preferences," Theory and Decision, Springer, vol. 83(3), pages 315-336, October.
    8. Sanghoon K Lee, 2015. "Disability Risk and Hyperbolic Discounting," Economics Bulletin, AccessEcon, vol. 35(1), pages 371-380.
    9. Groneck, Max & Ludwig, Alexander & Zimper, Alexander, 2024. "Who saves more, the naive or the sophisticated agent?," Journal of Economic Theory, Elsevier, vol. 219(C).
    10. Dorian Jullien, 2019. "Under Risk, Over Time and Regarding Other People: Rationality Across Three Dimensions," Working Papers hal-03233897, HAL.
    11. Anujit Chakraborty & Yoram Halevy & Kota Saito, 2020. "The Relation between Behavior under Risk and over Time," American Economic Review: Insights, American Economic Association, vol. 2(1), pages 1-16, March.
    12. Lu, Jay & Saito, Kota, 2018. "Random intertemporal choice," Journal of Economic Theory, Elsevier, vol. 177(C), pages 780-815.
    13. Mark Schneider, 2016. "Dual Process Utility Theory: A Model of Decisions Under Risk and Over Time," Working Papers 16-23, Chapman University, Economic Science Institute.
    14. Tony Beatton & Carly J. Moores & Dipanwita Sarkar & Jayanta Sarkar & Juliana Silva Goncalves & Helen A. Vidgen, 2021. "Do parental preferences predict engagement in child health programs?," Health Economics, John Wiley & Sons, Ltd., vol. 30(11), pages 2686-2700, November.

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    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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