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American Economic Review: Vol. 101 No. 5 (August 2011)

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Strotz Meets Allais: Diminishing Impatience and the Certainty Effect: Comment

Article Citation

Saito, Kota. 2011. "Strotz Meets Allais: Diminishing Impatience and the Certainty Effect: Comment." American Economic Review, 101(5): 2271-75.

DOI: 10.1257/aer.101.5.2271

Abstract

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. JEL: D81

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Authors

Saito, Kota (Northwestern U and CA Institute of Technology)

JEL Classifications

D81: Criteria for Decision-Making under Risk and Uncertainty


American Economic Review


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