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A subjective Discounted Utility Model

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  • André Lapied
  • Olivier Renault

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

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.
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Suggested Citation

  • André Lapied & Olivier Renault, 2012. "A subjective Discounted Utility Model," Post-Print hal-01670030, HAL.
    • Handle: RePEc:hal:journl:hal-01670030
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    References listed on IDEAS

    as
    1. Nicolas Drouhin, 2009. "Hyperbolic discounting may be time consistent," Economics Bulletin, AccessEcon, vol. 29(4), pages 2549-2555.
    2. 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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    4. W. M. Gorman, 1968. "The Structure of Utility Functions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 35(4), pages 367-390.
    5. Chateauneuf, Alain & Rebille, Yann, 2004. "Some characterizations of non-additive multi-period models," Mathematical Social Sciences, Elsevier, vol. 48(3), pages 235-250, November.
    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. André Lapied & Olivier Renault, 2012. "An Investigation of Time Consistency for Subjective Discontinued Utility," AMSE Working Papers 1210, Aix-Marseille School of Economics, France.
    2. Méder, Zsombor Z. & Flesch, János & Peeters, Ronald, 2017. "Naiveté and sophistication in dynamic inconsistency," Mathematical Social Sciences, Elsevier, vol. 87(C), pages 40-54.

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    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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