Strotz Meets Allais: Diminishing Impatience and the Certainty Effect: Comment
American Economic Review
vol. 101,
no. 5, August 2011
(pp. 2271-75)
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: D81Citation
Saito, Kota. 2011. "Strotz Meets Allais: Diminishing Impatience and the Certainty Effect: Comment." American Economic Review, 101 (5): 2271-75. DOI: 10.1257/aer.101.5.2271JEL Classification
- D81 Criteria for Decision-Making under Risk and Uncertainty