Viewing the future through a warped lens: Why uncertainty generates hyperbolic discounting |
| |
Authors: | Thomas Epper Helga Fehr-Duda Adrian Bruhin |
| |
Affiliation: | (1) ETH Zurich, Chair of Economics, Weinbergstrasse 35, 8092 Zurich, Switzerland |
| |
Abstract: | A large body of experimental research has demonstrated that, on average, people violate the axioms of expected utility theory as well as of discounted utility theory. In particular, aggregate behavior is best characterized by probability distortions and hyperbolic discounting. But is it the same people who are prone to these behaviors? Based on an experiment with salient monetary incentives we demonstrate that there is a strong and significant relationship between greater departures from linear probability weighting and the degree of decreasing discount rates at the level of individual behavior. We argue that this relationship can be rationalized by the uncertainty inherent in any future event, linking discounting behavior directly to risk preferences. Consequently, decreasing discount rates may be generated by people’s proneness to probability distortions. |
| |
Keywords: | |
本文献已被 SpringerLink 等数据库收录! |
|