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  4. November 2020
  5. Testable Implications of Models of Intertemporal Choice: Exponential Discounting and Its Generalizations

Testable Implications of Models of Intertemporal Choice: Exponential Discounting and Its Generalizations

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Abstract

We present revealed-preference characterizations of the most common models of intertemporal choice: the model of exponentially discounted concave utility, and some of its generalizations. Our characterizations take consumption data as primitives, and provide nonparametric revealed-preference tests. We apply our tests to data from two recent experiments and find that our axiomatization delivers new insights and perspectives on datasets that had been analyzed by traditional parametric methods.

Citation

Echenique, Federico, Taisuke Imai, and Kota Saito. 2020. "Testable Implications of Models of Intertemporal Choice: Exponential Discounting and Its Generalizations." American Economic Journal: Microeconomics, 12 (4): 114-43. DOI: 10.1257/mic.20180028

Additional Materials

JEL Classification

  • C91 Design of Experiments: Laboratory, Individual
  • D11 Consumer Economics: Theory
  • D15 Intertemporal Household Choice; Life Cycle Models and Saving
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