Journal of Risk and Uncertainty

, Volume 41, Issue 1, pp 67–79 | Cite as

At the nexus of risk and time preferences: An experimental investigation

Article

Abstract

Although many economic decisions involve choices between uncertain outcomes occurring at different times, most theoretical and empirical work restricts attention to one dimension or another. In this paper, we investigate whether both risk and time preferences can be represented by a single parameter. We collect experimental data to estimate models which allows for a disentanglement of risk and time preferences. Results reveal that the discounted expected utility model assumption, that risk and time preferences can be explained by a single parameter, is not supported by the data. The model estimates imply people prefer to delay the resolution of risky outcomes.

Keywords

Discounted expected utility Kreps-Porteus model Elasticity of intertemporal substitution 

JEL Classification

D81 D91 

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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Department of Agricultural EconomicsMississippi State UniversityMississippi StateUSA
  2. 2.Department of Agricultural EconomicsOklahoma State UniversityStillwaterUSA

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