The Relation between Behavior under Risk and over Time
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AbstractThe paper establishes a tight relation between nonstandard behaviors in the domains of risk and time, by considering a decision-maker with non-expected utility preferences who believes that only present consumption is certain while any future consumption is uncertain. We provide the first complete characterizations of the two-way relations between the certainty effect and present bias, and between the common ratio effect and temporal reversals.
CitationChakraborty, Anujit, Yoram Halevy, and Kota Saito. 2020. "The Relation between Behavior under Risk and over Time." American Economic Review: Insights, 2 (1): 1-16. DOI: 10.1257/aeri.20190051
- D11 Consumer Economics: Theory
- D15 Intertemporal Household Choice; Life Cycle Models and Saving
- D81 Criteria for Decision-Making under Risk and Uncertainty
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making