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Contribution Details
| Type | Journal Article |
| Scope | Discipline-based scholarship |
| Title | Risk preferences are not time preferences: balancing on a budget line: comment |
| Organization Unit | |
| Authors |
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| Item Subtype | Original Work |
| Refereed | Yes |
| Status | Published in final form |
| Language |
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| Journal Title | American Economic Review |
| Publisher | American Economic Association |
| Geographical Reach | international |
| ISSN | 0002-8282 |
| Volume | 105 |
| Number | 7 |
| Page Range | 2261 - 2271 |
| Date | 2015 |
| Abstract Text | In a recent experimental study of intertemporal risky decision making, Andreoni and Sprenger (2012) find that subjects exhibit a preference for intertemporal diversification, which is inconsistent with discounted expected utility theory. It was claimed that their results are also at odds with models involving probability weighting, such as rank-dependent utility and cumulative prospect theory. Here we demonstrate, however, that rank-dependent probability weighting explains intertemporal diversification if decision makers care about portfolio risk. Moreover, we provide a unified account of all of Andreoni and Sprenger's key findings. |
| Free access at | DOI |
| Related URLs | |
| Digital Object Identifier | 10.1257/aer.20130420 |
| Other Identification Number | merlin-id:10484 |
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