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Temptation-biased preferences for risk and time

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  • Schneider, Mark

Abstract

We introduce a model of temptation-biased preferences that generalizes quasi-hyperbolic discounting and quasi-rank-dependent probability weighting. The model explains empirically observed interactions between risk and time preferences and empirically observed correlations between expected utility violations and discounted utility violations.

Suggested Citation

  • Schneider, Mark, 2020. "Temptation-biased preferences for risk and time," Economics Letters, Elsevier, vol. 193(C).
    • Handle: RePEc:eee:ecolet:v:193:y:2020:i:c:s0165176520301944
    DOI: 10.1016/j.econlet.2020.109293
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    References listed on IDEAS

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    1. Manel Baucells & Franz H. Heukamp, 2012. "Probability and Time Trade-Off," Management Science, INFORMS, vol. 58(4), pages 831-842, April.
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    5. 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.
    6. 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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    9. Thomas Epper & Helga Fehr-Duda & Adrian Bruhin, 2011. "Viewing the future through a warped lens: Why uncertainty generates hyperbolic discounting," Journal of Risk and Uncertainty, Springer, vol. 43(3), pages 169-203, December.
    10. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Risk preference; Time preference; Discounted expected utility; Present bias; Temptation;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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