Evolution of Time Preferences and Attitudes toward Risk
Netzer, Nick. 2009. "Evolution of Time Preferences and Attitudes toward Risk."
American Economic Review,
This paper explores a general model of the evolution and adaption of hedonic
utility. It is shown that optimal utility will be increasing strongly in regions
where choices have to be made often and decision mistakes have a severe impact
on fitness. Several applications are suggested. In the context of intertemporal
preferences, the model offers an evolutionary explanation for the existence of
conflicting short- and long-run interests that lead to dynamic inconsistency.
Concerning attitudes toward risk, an evolutionary explanation is given for
S-shaped value functions that adjust to the decision maker's environment. (JEL
Article Full-Text Access
Netzer, Nick (Socioeconomic Institute, U Zurich)
D81: Criteria for Decision-Making under Risk and Uncertainty
D83: Search; Learning; Information and Knowledge; Communication; Belief