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Probabilistic intertemporal choice

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  • Blavatskyy, Pavlo R.

Abstract

Probabilistic intertemporal choice involves situations when a decision maker does not choose the same stream of intertemporal outcomes when presented with the same decision problem repeatedly; or when a decision maker makes non-repeated choice decisions that are inherently inconsistent (i.e. they cannot be represented by any rational time preferences); or when an aggregated choice pattern of several decision makers is contradictory. This paper presents behavioural characterization (axiomatization) of an additively separable utility (that includes discounted utility, quasi-hyperbolic discounting, generalized hyperbolic discounting and liminal discounting as special cases) embedded into Fechner model of random errors (also known as strong utility) and Luce’s choice model (also known as strict utility). Such probabilistic extensions of classical utility representations of time preferences are consistent with some behavioural patterns that challenge the descriptive validity of the original (deterministic) theories (e.g. some instances of the common difference effect).

Suggested Citation

  • Blavatskyy, Pavlo R., 2017. "Probabilistic intertemporal choice," Journal of Mathematical Economics, Elsevier, vol. 73(C), pages 142-148.
    • Handle: RePEc:eee:mateco:v:73:y:2017:i:c:p:142-148
    DOI: 10.1016/j.jmateco.2017.10.002
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    1. Pavlo R. Blavatskyy & Hela Maafi, 2018. "Estimating representations of time preferences and models of probabilistic intertemporal choice on experimental data," Journal of Risk and Uncertainty, Springer, vol. 56(3), pages 259-287, June.
    2. Blavatskyy, Pavlo, 2018. "Fechner’s strong utility model for choice among n>2 alternatives: Risky lotteries, Savage acts, and intertemporal payoffs," Journal of Mathematical Economics, Elsevier, vol. 79(C), pages 75-82.
    3. Pavlo Blavatskyy, 2020. "Expected discounted utility," Theory and Decision, Springer, vol. 88(2), pages 297-313, March.
    4. Blavatskyy, Pavlo, 2019. "Future plans and errors," Mathematical Social Sciences, Elsevier, vol. 102(C), pages 85-92.
    5. Pennesi, Daniele, 2021. "Intertemporal discrete choice," Journal of Economic Behavior & Organization, Elsevier, vol. 186(C), pages 690-706.
    6. Pavlo R. Blavatskyy, 2020. "Dual choice axiom and probabilistic choice," Journal of Risk and Uncertainty, Springer, vol. 61(1), pages 25-41, August.

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