Risk Preferences are Not Time Preferences: Comment

36 Pages Posted: 6 Oct 2012

See all articles by Stephen L. Cheung

Stephen L. Cheung

The University of Sydney; IZA Institute of Labor Economics

Abstract

Andreoni and Sprenger (in press) report evidence that distinct utility functions govern choices under certainty and risk. I investigate the robustness of their result to the experimental design. I find that the effect disappears completely when a multiple price list is used instead of a convex time budget design. Also, 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 partially driven by intertemporal diversification, suggesting an explanation in terms of concavity of the intertemporal, and not only the atemporal, utility function.

Keywords: intertemporal choice, risk and certainty, convex time budget, multiple price list

JEL Classification: C91, D03, D81, D90

Suggested Citation

Cheung, Stephen L., Risk Preferences are Not Time Preferences: Comment. IZA Discussion Paper No. 6762, Available at SSRN: https://ssrn.com/abstract=2157904 or http://dx.doi.org/10.2139/ssrn.2157904

Stephen L. Cheung (Contact Author)

The University of Sydney ( email )

School of Economics
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Sydney, NSW 2006
Australia
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HOME PAGE: http://https://sydney.edu.au/arts/economics/staff/profiles/stephen.cheung.php

IZA Institute of Labor Economics

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