The Missing Link: Unifying Risk Taking and Time Discounting
METADATA ONLY
Loading...
Author / Producer
Date
2012-11
Publication Type
Working Paper
ETH Bibliography
yes
Citations
Altmetric
METADATA ONLY
Data
Rights / License
Abstract
Almost all important decisions in people’s lives entail risky and delayed consequences. Regardless of whether we make choices involving health, wealth, love or education, almost every choice involves costs and benefits that are uncertain and materialize over time. Because risk and delay often arise simultaneously, theories of decision making should be capable of explaining how behavior under risk and over time interacts. There is, in fact, a growing body of evidence indicating important interactions between behaviorally revealed risk tolerance and patience. Risk taking behavior is delay dependent, and time discounting is risk dependent. Here we show that the inherent uncertainty of future events conjointly with people’s proneness to weight probabilities nonlinearly generates a unifying framework for explaining time-dependent risk taking, risk-dependent time discounting, preferences for late resolution of uncertainty, and several other puzzling interaction effects between risk and time.
Permanent link
Publication status
published
External links
Editor
Book title
Volume
96
Pages / Article No.
Publisher
University of Zurich, Department of Economics
Event
Edition / version
Methods
Software
Geographic location
Date collected
Date created
Subject
Risk Taking; Time Discounting; Probability Weighting; Decreasing Impatience; Increasing Risk Tolerance; Preference for Late Resolution of Uncertainty; Preference for One-Shot Resolution of Uncertainty
Organisational unit
03361 - Schubert, Renate (emeritus) / Schubert, Renate (emeritus)