Strotz Meets Allais: Diminishing Impatience and the Certainty Effect: Comment
Saito, Kota. 2011. "Strotz Meets Allais: Diminishing Impatience and the Certainty Effect: Comment."
American Economic Review,
Halevy (2008) states the equivalence between diminishing impatience (i.e., quasi-hyperbolic discounting) and the common ratio effect. The present paper shows that one way of the equivalence is false and shows the correct and general relationships: diminishing impatience is equivalent to the certainty effect and that strong diminishing impatience (i.e., hyperbolic discounting) is equivalent to the common ratio effect.
Article Full-Text Access
Saito, Kota (Northwestern U and CA Institute of Technology)
D81: Criteria for Decision-Making under Risk and Uncertainty