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Technical Note—On the Evaluation of Intertemporal Lotteries

Author

Listed:
  • Stephen C. Hora

    (Texas Tech University, Lubbock, Texas)

  • Larry M. Austin

    (Texas Tech University, Lubbock, Texas)

Abstract

We consider the evaluation of intertemporal lotteries using two tools: a single univariate utility function and a set of discount coefficients. If each of the lotteries consists of a single stochastic return to be received in a future period, then these tools are sufficient only if the utility function exhibits constant proportional risk aversion. Further, if the lotteries involve returns in more than one time period, we demonstrate that the tools are sufficient if, and only if, the utility function is linear.

Suggested Citation

  • Stephen C. Hora & Larry M. Austin, 1983. "Technical Note—On the Evaluation of Intertemporal Lotteries," Operations Research, INFORMS, vol. 31(4), pages 779-782, August.
    • Handle: RePEc:inm:oropre:v:31:y:1983:i:4:p:779-782
    DOI: 10.1287/opre.31.4.779
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