Working Paper: NBER ID: w24075
Authors: James Andreoni; Paul Feldman; Charles Sprenger
Abstract: Recent debate has identified important gaps in the understanding of intertemporal risks. Critical to closing these gaps is evidence on which dimension of intertemporal risk – the risk or the time – is evaluated first. Though under discounted expected utility this ordering is of no consequence, under discounted non-expected utility models the order of evaluation is critical. We provide experimental tests in which different orderings of evaluation generate different predictions for behavior. We find more support for the notion that the risk dimension is evaluated first.
Keywords: intertemporal risks; cumulative prospect theory; risk evaluation; time evaluation
JEL Codes: C91; D81; D91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| evaluation order (risk-first) (C52) | decision-making outcomes (D70) |
| evaluation order (time-first) (C52) | decision-making outcomes (D70) |
| risk-first evaluation (D81) | violations of common future risk invariance (CFRI) (D80) |
| time-first evaluation (C52) | no systematic violations of common future risk invariance (CFRI) (D80) |