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A subjective discounted utility model

Author

Listed:
  • André Lapied

    (GREQAM, Aix-Marseille University)

  • Olivier Renault

    (GREQAM, Aix-Marseille University)

Abstract

Intertemporal choices involve a great heterogeneity among discount mechanisms. In order to catch such diversity, we introduce an axiomatic Subjective Discounted Utility (SDU) model based on separability assumption. The originality of the SDU model rests on the fact that decision makers discount subjective periods, namely decision weights can be described as standard discount functions of time perception. In particular, our model appears as a generalization of both exponential and hyperbolic approaches.

Suggested Citation

  • André Lapied & Olivier Renault, 2012. "A subjective discounted utility model," Economics Bulletin, AccessEcon, vol. 32(2), pages 1171-1179.
    • Handle: RePEc:ebl:ecbull:eb-12-00107
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    References listed on IDEAS

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    1. Chateauneuf, Alain & Rebille, Yann, 2004. "Some characterizations of non-additive multi-period models," Mathematical Social Sciences, Elsevier, vol. 48(3), pages 235-250, November.
    2. Nicolas Drouhin, 2009. "Hyperbolic discounting may be time consistent," Economics Bulletin, AccessEcon, vol. 29(4), pages 2549-2555.
    3. Charles Harvey, 1995. "Proportional Discounting of Future Costs and Benefits," Mathematics of Operations Research, INFORMS, vol. 20(2), pages 381-399, May.
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    6. 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.
    7. George Loewenstein & Drazen Prelec, 1992. "Anomalies in Intertemporal Choice: Evidence and an Interpretation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 573-597.
    8. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    9. Bleichrodt, Han & Rohde, Kirsten I.M. & Wakker, Peter P., 2009. "Non-hyperbolic time inconsistency," Games and Economic Behavior, Elsevier, vol. 66(1), pages 27-38, May.
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    Cited by:

    1. Méder, Zsombor Z. & Flesch, János & Peeters, Ronald, 2017. "Naiveté and sophistication in dynamic inconsistency," Mathematical Social Sciences, Elsevier, vol. 87(C), pages 40-54.
    2. André Lapied & Olivier Renault, 2012. "An Investigation of Time Consistency for Subjective Discontinued Utility," Working Papers halshs-00793174, HAL.

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    More about this item

    Keywords

    Discounting; Time Perception; Separability;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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