A Model Of Intertemporal Choice With Rank Dependent Discounted Utility

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A Model of Intertemporal Choice with Rank-Dependent Discounted Utility

Author : Pavlo R. Blavatskyy
Publisher :
ISBN 13 :
Total Pages : 31 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis A Model of Intertemporal Choice with Rank-Dependent Discounted Utility by : Pavlo R. Blavatskyy

Download or read book A Model of Intertemporal Choice with Rank-Dependent Discounted Utility written by Pavlo R. Blavatskyy and published by . This book was released on 2014 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: Intertemporal choice is intuitively analogous to choice under risk/uncertainty when outcomes are viewed as consequences received in an uncertain future. "Discounted incremental utility" (DIU) model of intertemporal choice parallels expected utility representation of risk preferences. DIU coincides with Samuelson's discounted utility (constant/exponential discounting) when utility function is linear. DIU has several advantages over discounted utility (and its generalizations -- quasi-hyperbolic and generalized hyperbolic discounting): a) time preferences are continuous; b) utility does not increase when a larger payoff is split into two smaller payoffs, one of which is slightly delayed in time; c) utility is not separable across time periods, i.e. the model allows for intertemporal wealth, complementarity and substitution effects. DIU is generalized to rank-dependent discounted utility (RDDU), which is analogous to rank-dependent utility in choice under risk/uncertainty. RDDU with a concave utility and inverse S-shaped weighting function can rationalize several behavioral regularities such as a greater impatience for immediate outcomes. An application of RDDU to intertemporal consumption/saving reveals that consumers with an inverse S-shaped weighting function exhibit dynamic inconsistency. Initially, they commit to saving for future consumption but, as time passes, they prefer to renegotiate such a contract for an advance payment. Behavioral characterization/axiomatization of RDDU is presented.

Estimating Representations of Time Preferences and Models of Probabilistic Intertemporal Choice on Experimental Data

Author : Pavlo R. Blavatskyy
Publisher :
ISBN 13 :
Total Pages : 35 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Estimating Representations of Time Preferences and Models of Probabilistic Intertemporal Choice on Experimental Data by : Pavlo R. Blavatskyy

Download or read book Estimating Representations of Time Preferences and Models of Probabilistic Intertemporal Choice on Experimental Data written by Pavlo R. Blavatskyy and published by . This book was released on 2017 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: We here estimate a number of alternatives to discounted-utility theory, such as quasi-hyperbolic discounting, generalized hyperbolic discounting, and rank-dependent discounted utility with three different models of probabilistic choice. The data come from a controlled laboratory experiment designed to reveal individual time preferences in two rounds of 100 binary-choice problems. Rank-dependent discounted utility and its special case--the maximization of present discounted value--turn out to be the best-fitting theory (for about two-thirds of all subjects). For a great majority of subjects (72%), the representation of time preferences in Luce's choice model provides the best fit.

Temporal Dominance and Relative Patience in Intertemporal Choice with Monetary Outcomes

Author : Pavlo R. Blavatskyy
Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Temporal Dominance and Relative Patience in Intertemporal Choice with Monetary Outcomes by : Pavlo R. Blavatskyy

Download or read book Temporal Dominance and Relative Patience in Intertemporal Choice with Monetary Outcomes written by Pavlo R. Blavatskyy and published by . This book was released on 2016 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: A stream of intertemporal monetary payoffs X first-order (second-order) temporarily dominates another stream Y if (the area below) the cumulative payoff function of X up till any moment of time is always at least as high as that of Y; or, equivalently, any rank-dependent discounted utility maximizer with a strictly increasing (concave) utility function and a strictly decreasing (convex) discount function prefers X over Y. An individual A is relatively more patient than an individual B if, whenever B is willing to undertake some investment project, A is moreover so; or, equivalently, for any stream of monetary payoffs, A's present-day equivalent is at least as high as that of B; or, equivalently, A's discount factor is at least as high as that of B and B's utility function is “more concave” than that of A. Related concepts of absolute patience and comparative probabilistic patience are briefly discussed.

Discounted Incremental Utility Model of Intertemporal Choice

Author : Pavlo R. Blavatskyy
Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (13 download)

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Book Synopsis Discounted Incremental Utility Model of Intertemporal Choice by : Pavlo R. Blavatskyy

Download or read book Discounted Incremental Utility Model of Intertemporal Choice written by Pavlo R. Blavatskyy and published by . This book was released on 2015 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: A new model of intertemporal choice -- "discounted incremental utility" (DIU) -- is presented. DIU coincides with Samuelson's discounted utility (constant/exponential discounting) when utility function is linear. DIU has several advantages over discounted utility (and its generalizations -- quasi-hyperbolic and generalized hyperbolic discounting): a) time preferences are continuous; b) utility does not increase when a larger payoff is split into two smaller payoffs, one of which is slightly delayed in time; c) utility is not separable across time periods, i.e. the model allows for intertemporal wealth, complementarity and substitution effects. The model can also rationalize several behavioral regularities such as a greater impatience for immediate outcomes if the assumption of constant/exponential discounting is relaxed. An application to intertemporal consumption/saving reveals that consumers may exhibit dynamic inconsistency. Initially, they commit to saving for future consumption but, as time passes, they prefer to renegotiate such a contract for an advance payment. Behavioral characterization/axiomatization of the new model is presented.

Explorations of Intertemporal Choice

Author : Steven B. Greene
Publisher :
ISBN 13 :
Total Pages : 194 pages
Book Rating : 4.F/5 ( download)

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Book Synopsis Explorations of Intertemporal Choice by : Steven B. Greene

Download or read book Explorations of Intertemporal Choice written by Steven B. Greene and published by . This book was released on 1991 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Intertemporal Choice

Author : Keith Matthew Marzilli Ericson
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (19 download)

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Book Synopsis Intertemporal Choice by : Keith Matthew Marzilli Ericson

Download or read book Intertemporal Choice written by Keith Matthew Marzilli Ericson and published by . This book was released on 2018 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Intertemporal tradeoffs play a key role in many personal decisions and policy questions. We describe models of intertemporal choice, identify empirical regularities in choice, and pose new questions for research. The focus for intertemporal choice research is no longer whether the exponential discounted utility model is empirically accurate, but, instead, what models best explain the robust behavioral deviations we observe. We introduce the term "present-focused preferences" to describe the large class of models that prioritize present flows of experienced utility. Present-focused preferences need not coincide with a preference for commitment or dynamically inconsistent preferences. Present-bias is a special case of present-focused preferences.

Intertemporal Choice

Author : Keith Marzilli Ericson
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (18 download)

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Book Synopsis Intertemporal Choice by : Keith Marzilli Ericson

Download or read book Intertemporal Choice written by Keith Marzilli Ericson and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Intertemporal tradeoffs play a key role in many personal decisions and policy questions. We describe models of intertemporal choice, identify empirical regularities in choice, and pose new questions for research. The focus for intertemporal choice research is no longer whether the exponential discounted utility model is empirically accurate, but, instead, what models best explain the robust behavioral deviations we observe. We introduce the term "present-focused preferences" to describe the large class of models that prioritize present flows of experienced utility. Present-focused preferences need not coincide with a preference for commitment or dynamically inconsistent preferences. Present-bias is a special case of present-focused preferences.

Identification of Intertemporal Preferences in History-dependent Dynamic Discrete Choice Models

Author : Matthew R. Levy
Publisher :
ISBN 13 :
Total Pages : 41 pages
Book Rating : 4.:/5 (114 download)

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Book Synopsis Identification of Intertemporal Preferences in History-dependent Dynamic Discrete Choice Models by : Matthew R. Levy

Download or read book Identification of Intertemporal Preferences in History-dependent Dynamic Discrete Choice Models written by Matthew R. Levy and published by . This book was released on 2020 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the identification of intertemporal preferences in a stationary dynamic discrete decision model. We propose a new approach which focuses on problems which are intrinsically dynamic: either there is endogenous variation in the choice set, or preferences depend directly on the history. History dependence links the choices of the decision-maker across periods in a more fundamental sense standard dynamic discrete choice models typically assume. We consider both exponential discounting as well as the quasi-hyperbolic discounting models of time preferences. We show that if the utility function or the choice set depends on the current states as well as the past choices and/or states, then time preferences are non-parametrically point-identified separately from the utility function under mild conditions on the data and we may also recover the instantaneous utility function without imposing any normalization on the utility across states.

Beliefs, Interactions and Preferences

Author : Mark J. Machina
Publisher : Springer Science & Business Media
ISBN 13 : 1475745923
Total Pages : 373 pages
Book Rating : 4.4/5 (757 download)

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Book Synopsis Beliefs, Interactions and Preferences by : Mark J. Machina

Download or read book Beliefs, Interactions and Preferences written by Mark J. Machina and published by Springer Science & Business Media. This book was released on 2013-03-09 with total page 373 pages. Available in PDF, EPUB and Kindle. Book excerpt: Beliefs, Interactions and Preferences in Decision Making mixes a selection of papers, presented at the Eighth Foundations and Applications of Utility and Risk Theory (`FUR VIII') conference in Mons, Belgium, together with a few solicited papers from well-known authors in the field. This book addresses some of the questions that have recently emerged in the research on decision-making and risk theory. In particular, authors have modeled more and more as interactions between the individual and the environment or between different individuals the emergence of beliefs as well as the specific type of information treatment traditionally called `rationality'. This book analyzes several cases of such an interaction and derives consequences for the future of decision theory and risk theory. In the last ten years, modeling beliefs has become a specific sub-field of decision making, particularly with respect to low probability events. Rational decision making has also been generalized in order to encompass, in new ways and in more general situations than it used to be fitted to, multiple dimensions in consequences. This book deals with some of the most conspicuous of these advances. It also addresses the difficult question to incorporate several of these recent advances simultaneously into one single decision model. And it offers perspectives about the future trends of modeling such complex decision questions. The volume is organized in three main blocks: The first block is the more `traditional' one. It deals with new extensions of the existing theory, as is always demanded by scientists in the field. A second block handles specific elements in the development of interactions between individuals and their environment, as defined in the most general sense. The last block confronts real-world problems in both financial and non-financial markets and decisions, and tries to show what kind of contributions can be brought to them by the type of research reported on here.

Prospect Theory

Author : Peter P. Wakker
Publisher : Cambridge University Press
ISBN 13 : 1139489100
Total Pages : 519 pages
Book Rating : 4.1/5 (394 download)

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Book Synopsis Prospect Theory by : Peter P. Wakker

Download or read book Prospect Theory written by Peter P. Wakker and published by Cambridge University Press. This book was released on 2010-07-22 with total page 519 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prospect Theory: For Risk and Ambiguity, provides a comprehensive and accessible textbook treatment of the way decisions are made both when we have the statistical probabilities associated with uncertain future events (risk) and when we lack them (ambiguity). The book presents models, primarily prospect theory, that are both tractable and psychologically realistic. A method of presentation is chosen that makes the empirical meaning of each theoretical model completely transparent. Prospect theory has many applications in a wide variety of disciplines. The material in the book has been carefully organized to allow readers to select pathways through the book relevant to their own interests. With numerous exercises and worked examples, the book is ideally suited to the needs of students taking courses in decision theory in economics, mathematics, finance, psychology, management science, health, computer science, Bayesian statistics, and engineering.

The Foundations of Behavioral Economic Analysis

Author : Sanjit S. Dhami
Publisher : Oxford University Press
ISBN 13 : 0198715528
Total Pages : 1799 pages
Book Rating : 4.1/5 (987 download)

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Book Synopsis The Foundations of Behavioral Economic Analysis by : Sanjit S. Dhami

Download or read book The Foundations of Behavioral Economic Analysis written by Sanjit S. Dhami and published by Oxford University Press. This book was released on 2016 with total page 1799 pages. Available in PDF, EPUB and Kindle. Book excerpt: It considers the evidence against the exponential discounted utility model and describes several behavioral models such as hyperbolic discounting, attribute based models and the reference time theory. Part IV describes the evidence on classical game theory and considers several models of behavioral game theory, including level-k and cognitive hierarchy models, quantal response equilibrium, and psychological game theory. Part V considers behavioral models of learning that include evolutionary game theory, classical models of learning, experience weighted attraction model, learning direction theory, and stochastic social dynamics. Part VI studies the role of emotions; among other topics it considers projection bias, temptation preferences, happiness economics, and interaction between emotions and cognition. Part VII considers bounded rationality. The three main topics considered are judgment heuristics and biases, mental accounting, and behavioral finance.

Pricing the Planet's Future

Author : Christian Gollier
Publisher : Princeton University Press
ISBN 13 : 0691148767
Total Pages : 244 pages
Book Rating : 4.6/5 (911 download)

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Book Synopsis Pricing the Planet's Future by : Christian Gollier

Download or read book Pricing the Planet's Future written by Christian Gollier and published by Princeton University Press. This book was released on 2013 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: Today, the judge, the citizen, the politician, and the entrepreneur are concerned with the sustainability of our development.

The Foundations of Behavioral Economic Analysis

Author : Sanjit Dhami
Publisher : Oxford University Press
ISBN 13 : 0192574655
Total Pages : 150 pages
Book Rating : 4.1/5 (925 download)

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Book Synopsis The Foundations of Behavioral Economic Analysis by : Sanjit Dhami

Download or read book The Foundations of Behavioral Economic Analysis written by Sanjit Dhami and published by Oxford University Press. This book was released on 2019-02-14 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: Taken from the first definitive introduction to behavioral economics, The Foundations of Behavioral Economic Analysis: Behavioral Time Discounting is an authoritative and cutting edge guide to this essential topic for advanced undergraduate and postgraduate students. It considers the evidence against the exponential discounted utility model and describes several behavioral models such as hyperbolic discounting, attribute based models, and the reference time theory. This updated extract from Dhami's leading textbook allows the reader to pursue subsections of this vast and rapidly growing field and to tailor their reading to their specific interests in behavioural economics.

The Routledge Handbook of the Philosophy of Economics

Author : Conrad Heilmann
Publisher : Taylor & Francis
ISBN 13 : 1317578066
Total Pages : 533 pages
Book Rating : 4.3/5 (175 download)

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Book Synopsis The Routledge Handbook of the Philosophy of Economics by : Conrad Heilmann

Download or read book The Routledge Handbook of the Philosophy of Economics written by Conrad Heilmann and published by Taylor & Francis. This book was released on 2021-11-29 with total page 533 pages. Available in PDF, EPUB and Kindle. Book excerpt: The most fundamental questions of economics are often philosophical in nature, and philosophers have, since the very beginning of Western philosophy, asked many questions that current observers would identify as economic. The Routledge Handbook of Philosophy of Economics is an outstanding reference source for the key topics, problems, and debates at the intersection of philosophical and economic inquiry. It captures this field of countless exciting interconnections, affinities, and opportunities for cross-fertilization. Comprising 35 chapters by a diverse team of contributors from all over the globe, the Handbook is divided into eight sections: I. Rationality II. Cooperation and Interaction III. Methodology IV. Values V. Causality and Explanation VI. Experimentation and Simulation VII. Evidence VIII. Policy The volume is essential reading for students and researchers in economics and philosophy who are interested in exploring the interconnections between the two disciplines. It is also a valuable resource for those in related fields like political science, sociology, and the humanities.

Generalized Expected Utility Theory

Author : John Quiggin
Publisher : Springer Science & Business Media
ISBN 13 : 9401121826
Total Pages : 208 pages
Book Rating : 4.4/5 (11 download)

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Book Synopsis Generalized Expected Utility Theory by : John Quiggin

Download or read book Generalized Expected Utility Theory written by John Quiggin and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic analysis of choice under uncertainty has been dominated by the expected utility (EU) model, yet the EU model has never been without critics. Psychologists accumulated evidence that individual choices under uncertainty were inconsistent with the predictions of the EU model. Applied work in areas such as finance was dominated by the simpler mean-variance analysis. In the 1980s this skepticism was dispelled as a number of generalizations of EU were proposed, most of which were capable of explaining evidence inconsistent with EU, while preserving transitivity and dominance. Generalized expected utility is now a flourishing subfield of economics, with dozens of competing models and considerable literature exploring their theoretical properties and comparing their empirical performance. But the EU model remains the principal tool for the analysis of choice under uncertainty. There is a view that generalized models are too difficult to handle or incapable of generating sharp results. This creates a need to show that the new models can be used in the kinds of economic analysis for which EU has been used, and that they can yield new and interesting results. This book meets this need by describing one of the most popular generalized models -- the rank-dependent expected utility model (RDEU), also known as anticipated utility, EU with rank-dependent preferences, the dual theory of choice under uncertainty, and simply as rank-dependent utility. As the many names indicate, the model has been approached in many ways by many scientists and for this reason, consideration of a single model sheds light on many of the concerns that have motivated the development of generalized utility models. The popularity of the RDEU model rests on its simplicity and tractability. The standard tools of analysis developed for EU theory may be applied to the RDEU model, but since RDEU admits behavior inconsistent with EU, the field of potential applications is widened. As such, the RDEU model is not as much a competitor to EU as an extension based on less restrictive assumptions.

Advances in Behavioral Economics

Author : Colin F. Camerer
Publisher : Princeton University Press
ISBN 13 : 1400829119
Total Pages : 769 pages
Book Rating : 4.4/5 (8 download)

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Book Synopsis Advances in Behavioral Economics by : Colin F. Camerer

Download or read book Advances in Behavioral Economics written by Colin F. Camerer and published by Princeton University Press. This book was released on 2011-12-12 with total page 769 pages. Available in PDF, EPUB and Kindle. Book excerpt: Twenty years ago, behavioral economics did not exist as a field. Most economists were deeply skeptical--even antagonistic--toward the idea of importing insights from psychology into their field. Today, behavioral economics has become virtually mainstream. It is well represented in prominent journals and top economics departments, and behavioral economists, including several contributors to this volume, have garnered some of the most prestigious awards in the profession. This book assembles the most important papers on behavioral economics published since around 1990. Among the 25 articles are many that update and extend earlier foundational contributions, as well as cutting-edge papers that break new theoretical and empirical ground. Advances in Behavioral Economics will serve as the definitive one-volume resource for those who want to familiarize themselves with the new field or keep up-to-date with the latest developments. It will not only be a core text for students, but will be consulted widely by professional economists, as well as psychologists and social scientists with an interest in how behavioral insights are being applied in economics. The articles, which follow Colin Camerer and George Loewenstein's introduction, are by the editors, George A. Akerlof, Linda Babcock, Shlomo Benartzi, Vincent P. Crawford, Peter Diamond, Ernst Fehr, Robert H. Frank, Shane Frederick, Simon Gächter, David Genesove, Itzhak Gilboa, Uri Gneezy, Robert M. Hutchens, Daniel Kahneman, Jack L. Knetsch, David Laibson, Christopher Mayer, Terrance Odean, Ted O'Donoghue, Aldo Rustichini, David Schmeidler, Klaus M. Schmidt, Eldar Shafir, Hersh M. Shefrin, Chris Starmer, Richard H. Thaler, Amos Tversky, and Janet L. Yellen.

Handbook of Behavioral Economics - Foundations and Applications 1

Author :
Publisher : Elsevier
ISBN 13 : 0444633898
Total Pages : 749 pages
Book Rating : 4.4/5 (446 download)

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Book Synopsis Handbook of Behavioral Economics - Foundations and Applications 1 by :

Download or read book Handbook of Behavioral Economics - Foundations and Applications 1 written by and published by Elsevier. This book was released on 2018-09-27 with total page 749 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of Behavioral Economics: Foundations and Applications presents the concepts and tools of behavioral economics. Its authors are all economists who share a belief that the objective of behavioral economics is to enrich, rather than to destroy or replace, standard economics. They provide authoritative perspectives on the value to economic inquiry of insights gained from psychology. Specific chapters in this first volume cover reference-dependent preferences, asset markets, household finance, corporate finance, public economics, industrial organization, and structural behavioural economics. This Handbook provides authoritative summaries by experts in respective subfields regarding where behavioral economics has been; what it has so far accomplished; and its promise for the future. This taking-stock is just what Behavioral Economics needs at this stage of its so-far successful career. Helps academic and non-academic economists understand recent, rapid changes in theoretical and empirical advances within behavioral economics Designed for economists already convinced of the benefits of behavioral economics and mainstream economists who feel threatened by new developments in behavioral economics Written for those who wish to become quickly acquainted with behavioral economics