scholarly journals Risk Preferences Are Not Time Preferences: Discounted Expected Utility with a Disproportionate Preference for Certainty

2010 ◽  
Author(s):  
James Andreoni ◽  
Charles Sprenger
Keyword(s):  
Expected Utility ◽  
Risk Preferences ◽  
Time Preferences

scholarly journals Risk Preferences Are Not Time Preferences

2012 ◽  
Vol 102 (7) ◽  
pp. 3357-3376 ◽  
Author(s):  
James Andreoni ◽  
Charles Sprenger
Keyword(s):  
Prospect Theory ◽  
Expected Utility ◽  
Choice Experiment ◽  
Intertemporal Choice ◽  
Risk Preferences ◽  
Hyperbolic Discounting ◽  
Time Preferences ◽  
Common Ratio ◽  
The Future

Risk and time are intertwined. The present is known while the future is inherently risky. This is problematic when studying time preferences since uncontrolled risk can generate apparently present-biased behavior. We systematically manipulate risk in an intertemporal choice experiment. Discounted expected utility performs well with risk, but when certainty is added common ratio predictions fail sharply. The data cannot be explained by prospect theory, hyperbolic discounting, or preferences for resolution of uncertainty, but seem consistent with a direct preference for certainty. The data suggest strongly a difference between risk and time preferences. (JEL C91 D81 D91)

The Performance of Time-Preference and Risk-Preference Measures in Surveys

2021 ◽  
Author(s):  
Joshua Tasoff ◽  
Wenjie Zhang
Keyword(s):  
Time Preference ◽  
Risk Preferences ◽  
Risk Preference ◽  
Time Preferences ◽  
Self Report ◽  
Data Set ◽  
Financial Decisions ◽  
Wide Range ◽  
Substantial Heterogeneity ◽  
Report Measure

Time preferences and risk preferences play an important role in a wide range of behavior, including financial decisions, entrepreneurship, and the proper incentivizing of agents. Numerous methods have been developed to measure these preferences hypothetically in surveys, but they have yielded inconsistent results. We analyze a panel data set in which subjects have collectively answered more than 400 surveys including 15 time-preference and 36 risk-preference elicitations. We evaluate the performance of these measures using the criteria of (1) ability to predict economically important behavior and (2) distinctness from other observables. We find substantial heterogeneity in the predictiveness of the measures. The best performing measure for time-preference is a titration method, in which a sequence of adaptive binary-choice questions narrows in on a subject’s indifference point, and for risk-preference it is a self-report measure of risk aversion. Using factor analysis, we find that time preferences are well explained by a single factor, but risk preferences load on multiple factors. However, the first factor loads almost entirely on self-reported risk-preference measures, and this factor explains much of the variation. The evidence can help inform researchers about which elicitation methods to include in their surveys. This paper was accepted by Yan Chen, decision analysis.

scholarly journals Efficiency, equity, and social rationality under uncertainty

2021 ◽  
Author(s):  
Kaname Miyagishima
Keyword(s):  
Simple Model ◽  
Social Welfare ◽  
Expected Utility ◽  
Risk Preferences ◽  
Utility Functions ◽  
Subjective Expected Utility ◽  
Risk Averse ◽  
Social Rationality ◽  
Certainty Equivalents ◽  
Ex Post

AbstractIn a simple model where agents’ monetary payoffs are uncertain, this paper examines the aggregation of subjective expected utility functions which are interpersonally noncomparable. A maximin social welfare criterion is derived from axioms of efficiency, ex post equity, and social rationality, combined with the independence of beliefs and risk preferences in riskless situations (Chambers and Echenique in Games Econ Behav 76:582–595, 2012). The criterion compares allocations by the values of the prospects composed of the statewise minimum payoffs evaluated by the certainty equivalents. Because of this construction, the criterion is egalitarian and risk averse.

Experimental Microfoundations for Resolve: II

2016 ◽  
Author(s):  
Joshua D. Kertzer
Keyword(s):  
Military Intervention ◽  
Risk Preferences ◽  
Demographic Characteristics ◽  
Self Control ◽  
Time Preferences ◽  
Behavioral Measure ◽  
Strongly Correlated ◽  
Military Interventions ◽  
Individual Level ◽  
Reputational Costs

This chapter investigates individual-level microfoundations of resolve in the context of public opinion about military interventions by conducting a national survey of American adults. The survey consisted of three parts: a factorial experiment manipulating the human and reputational costs of a hypothetical military intervention; a dispositional questionnaire measuring time preferences, risk preferences, and honor orientations; and a concluding questionnaire measuring general demographic characteristics. The results suggest that the costs of fighting have relatively little effect on the amount of resolve displayed by participants, while the reputational costs of backing down play a relatively significant one. The largest effects are dispositional: time and risk preferences are strongly correlated with resolve, as is a behavioral measure of trait self-control.

Contractualism and risk preferences

2020 ◽  
pp. 1-24
Author(s):  
Tobey K. Scharding
Keyword(s):  
Expected Utility ◽  
Risk Preferences ◽  
Risk Preference ◽  
Individual Risk ◽  
Average Risk ◽  
Ex Ante ◽  
Risk Thresholds

Abstract I evaluate two contractualist approaches to the ethics of risk: mutual constraint and the probabilistic, ex ante approach. After explaining how these approaches address problems in earlier interpretations of contractualism, I object that they fail to respond to diverse risk preferences in populations. Some people could reasonably reject the risk thresholds associated with these approaches. A strategy for addressing this objection is considering individual risk preferences, similar to those Buchak discusses concerning expected-utility approaches to risk. I defend the risk-preferences-adjusted (RISPREAD) contractualist approach, which calculates a population’s average risk preference and permits risk thresholds below that preference, only.

Comment on “Risk Preferences Are Not Time Preferences”: On the Elicitation of Time Preference under Conditions of Risk

2015 ◽  
Vol 105 (7) ◽  
pp. 2242-2260 ◽  
Author(s):  
Stephen L. Cheung
Keyword(s):  
Experimental Design ◽  
Utility Function ◽  
Time Preference ◽  
Time Budget ◽  
Risk Preferences ◽  
Utility Functions ◽  
Time Preferences ◽  
Price List

Andreoni and Sprenger (2012a, b) report evidence that distinct utility functions govern choices under certainty and risk. I investigate the robustness of this result to the experimental design. I find that the effect disappears completely when a multiple price list instrument is used instead of a convex time budget design. Alternatively, the effect is reduced by half when sooner and later payment risks are realized using a single lottery instead of two independent lotteries. The result is thus at least partially driven by intertemporal diversification, supporting an explanation in terms of concavity of the intertemporal, and not only atemporal, utility function. (JEL C91, D81, D91)

Software Project Managers’ Risk Preferences

1996 ◽  
Vol 11 (4) ◽  
pp. 287-295
Author(s):  
Thomas W. Lauer
Keyword(s):  
Software Development ◽  
Prospect Theory ◽  
Expected Utility ◽  
Utility Theory ◽  
Risk Preferences ◽  
Expected Utility Theory ◽  
Project Managers ◽  
Development Projects ◽  
Software Project ◽  
Potential Importance

A questionnaire was administered to 68 software project managers (SPMs). Questions were designed to test whether SPMs’ risky judgments were more consistent with Expected Utility Theory or Prospect Theory. Although the results were more consistent with Prospect Theory, they differed in important ways showing SPMs’ judgments to be less homogeneous than is assumed by either theory. These results highlight the potential importance of SPMs’ judgments to the outcome of software development projects.

scholarly journals The Effect of Individual Time Preferences on Smoking Behavior: Insights from Behavioral Economics

2020 ◽  
Author(s):  
Moslem SOOFI ◽  
Ali AKBARI SARI ◽  
Farid NAJAFI
Keyword(s):  
Cigarette Smoking ◽  
Adult Population ◽  
Risk Preferences ◽  
Smoking Behavior ◽  
Time Preferences ◽  
Probit Regression ◽  
Effective Prevention ◽  
Percentage Points ◽  
Trade Offs ◽  
Unit Increase

Background: We aimed to explore the correlation between the time and risk preferences and the smoking behavior of adult population in western Iran. Methods: Overall, 792 individuals with the age of 35 to 65 yr participating in an ongoing national cohort study (Persian Cohort) were approached to complete a pre-structured questionnaire in 2017. Time preferences were measured using a standard choice-based method. The individuals' discount rates were identified by questions that offered binary monetary choices on immediate future and distant future, by making trade-offs between them. Probit regression model was used to investigate the relationship between time preferences and smoking when controlling for demographic and socioeconomic variables. Results: Time and risk preferences had statistically significant direct correlations with smoking. A unit increase in discount rate was associated with a 4.4% percentage point increase in the likelihood of being smoker. A present-biased individual had 5.7% percentage points lower likelihood of being smoker. Moreover, a unit increase in willingness to take the risk increased the likelihood of being a smoker by 1.5% percentage points. Conclusion: Time and risk preferences are important determinants of smoking behavior. These factors should be considered in designing effective prevention and control programs. Policies that increase the immediate costs of cigarette smoking or the immediate benefits of smoking cessation are likely to have a greater impact on reducing the prevalence of cigarette smoking.

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