This paper studies the interaction between savagean uncertainty and time preferences. We introduce a variation of the discounted subjective expected utility model, where time preferences are state dependent. Before uncertainty is resolved, the individual is unsure about the discount factor that will be used, even when evaluating certain payoffs. The model can account for the present bias and diminishing impatience, even if the future is discounted geometrically. The present bias disappears when the immediate payoff becomes uncertain. Although preferences are not stationary, choices may be time consistent.

Uncertain discount and hyperbolic preferences

PENNESI, DANIELE
2017

Abstract

This paper studies the interaction between savagean uncertainty and time preferences. We introduce a variation of the discounted subjective expected utility model, where time preferences are state dependent. Before uncertainty is resolved, the individual is unsure about the discount factor that will be used, even when evaluating certain payoffs. The model can account for the present bias and diminishing impatience, even if the future is discounted geometrically. The present bias disappears when the immediate payoff becomes uncertain. Although preferences are not stationary, choices may be time consistent.
2017
Pennesi, Daniele
File in questo prodotto:
Eventuali allegati, non sono esposti

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/615414
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 4
  • ???jsp.display-item.citation.isi??? 4
social impact