A simultaneous approach to the estimation of risk aversion and the subjective time discount rate

Journal of Economic Behavior and Organization

Volumn 70, Issue 1-2, 2009, Pages 374-388

  Booij, Adam S ^a   van Praag, Bernard M S ^a  

^a UNIVERSITY OF AMSTERDAM   (Netherlands)

Author keywords

Asset integration; Expected utility; Hypothetical questions; Lotteries; Risk aversion; Time preference

Indexed keywords

EID: 64449083387     PISSN: 01672681     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jebo.2009.01.005     Document Type: Article

References (74)

1. Allais M. Le comportement de l'homme rationnel devant le risque, critique des postulats et axiomes de l'École américaine. Econometrica 21 (1953) 503-546
2. Anderhub V., Güth W., Gneezy U., and Sonsino D. On the interaction of risk and time preferences-an experimental study. German Economic Review 2 (2001) 239-253
3. Andersen S., Harrison G.W., Lau M.I., and Rutström E. Eliciting risk and time preferences. Econometrica 76 (2008) 583-618
4. Arrow K.J. Aspects of the Theory of Risk Bearing (1965), Yrjö Jahnssonin Säätö, Helsinki
5. Barsky R., Juster F.T., Kimball M.S., and Shapiro M.D. Preference parameters and behavioral heterogeneity. An experimental approach in the health and retirement study. Quarterly Journal of Economics 112 (1997) 537-580
6. Becker G.S., and Mulligan C.B. The endogenous determination of time preference. Quarterly Journal of Economics 112 (1997) 729-758
7. Beetsma R.M.W.J., and Schotman P.C. Measuring risk attitudes in a natural experiment: data from the television game show lingo. Economic Journal 111 (2001) 821-848
8. Benzion U., Rapoport A., and Yagil J. Discount rates inferred from decisions: an experimental study. Management Science 35 (1989) 270-284
9. Binswanger H.P. Attitudes toward risk: experimental measurement in rural India. American Journal of Agricultural Economics 62 (1980) 395-407
10. Blavatskyy P.R. Stochastic expected utility theory. Journal of Risk Uncertainty 34 (2007) 259-286
11. Bliss R.R., and Panigirtzoblou N. Option-implied risk aversion estimates. Journal of Finance 59 (2004) 407-446
12. Borghans L., and Golsteyn B.H.H. Time discounting and the body mass index: evidence from the Netherlands. Economics and Human Biology 4 (2006) 39-61
13. Bretteville-Jensen A.L. Addiction and discounting. Journal of Health Economics 18 (1999) 393-407
14. Camerer C.F., and Hogarth R.M. The effects of financial incentives in experiments: a review and capital-labor-production framework. Journal of Risk and Uncertainty 19 (1999) 7-42
15. Carbone E., and Hey J.D. Which error story is best?. Journal of Risk and Uncertainty 20 (2000) 161-176
16. Charness, G., Gneezy, U., 2007. Strong Evidence for Gender Differences in Investment. SSRN Working Paper, Available at SSRN: http://ssrn.com/abstract=648735.
17. Choi, S., Fisman, R., Gale, D., Kariv, S., 2006. Substantive and Procedural Rationality in Decisions Under Uncertainty. Experimental Social Science Laboratory (Xlab) Paper XL06-008, Available at: http://repositories.cdlib.org/iber/xlab/XL06-008.
18. Coller M., and Williams M.B. Eliciting individual discount rates. Experimental Economics 2 (1999) 107-127
19. Cox J.C., and Sadiraj V. Small- and large-stakes risk aversion: implications of concavity calibration for decision theory. Games and Economic Behavior 56 (2006) 45-60
20. Cramer J.S., Hartog J., Jonker N., and Van Praag C. Low risk aversion encourages the choice for entrepreneurship: an empirical test of a truism. Journal of Economic Behavior and Organization 48 (2002) 29-36
21. Dohmen, T.J., Falk, A., Huffman, D., Schupp, J., Sunde, U., Wagner, G.G., 2006. Individual risk attitudes: new evidence from a large, representative, experimentally-validated survey. C.E.P.R. Discussion Papers, 5517, Available at: http://www.cepr.org/pubs/dps/DP5517.asp.
22. Donkers B., and van Soest A. Subjective measures of household preferences and financial decisions. Journal of Economic Psychology 20 (1999) 613-642
23. Donkers B., Melenberg B., and van Soest A. Estimating risk attitudes using lotteries: a large sample approach. Journal of Risk and Uncertainty 22 (2001) 165-195
24. Eckel C., Johnson C., and Montmarquette C. Saving decisions of the working poor: short- and long-term horizons. In: Carpenter J., Harrison G.W., and List J.A. (Eds). Field Experiments in Economics. Research in Experimental Economics Series vol. 10 (2005), JAI Press, Greenwich, CT 219-260
25. Epstein L.G., and Zin S.E. Substitution, risk aversion and the temporal behavior of consumption and asset returns: a theoretical framework. Econometrica 57 (1989) 937-969
26. Frederick S., Loewenstein G., and O'Donoghue T. Time discounting and time preference: a critical review. Journal of Economic Literature 40 (2002) 351-401
27. Fuchs V.R. Time preference and health: an exploratory study. The Economics of Health 1 (1991) 123-150
28. Gollier C. The Economics of Risk and Time (2001), MIT Press, Cambridge, MA
29. Guiso L., and Paiella M. The role of risk aversion in predicting individual behavior. In: Chiappori P., and Gollier C. (Eds). Competitive Failures in Insurance Markets: Theoretical Analysis and Policy Implications (2006), MIT Press, Cambridge, MA 213-250
30. Halek M., and Eisenhauer J.G. Demography of risk aversion. Journal of Risk and Insurance 68 (2001) 1-34
31. Hall R.E. Intertemporal substitution in consumption. Journal of Political Economy 96 (1988) 339-357
32. Harrison G.W., Lau M.I., Rutström E.E., and Sullivan M.B. Eliciting risk and time preferences using field experiments: some methodological issues. In: Carpenter J., Harrison G.W., and List J.A. (Eds). Field Experiments in Economics. Research in Experimental Economics Series vol. 10 (2005), JAI Press, Greenwich, CT 125-218
33. Harrison G.W., Lau M.I., and Williams M.B. Estimating individual discount rates for Denmark: a field experiment. American Economic Review 92 (2002) 1606-1617
34. Harrison G.W., List J.A., and Towe C. Naturally occurring preferences and exogenous laboratory experiments: a case study of risk aversion. Econometrica 75 (2007) 433-458
35. Hartog, J., Van Ophem, H., Bajdechi, S.M., 2004. How Risky is Investment in Human Capital? CESifo Working Paper Series 1261, http://ideas.repec.org/p/ces/ceswps/1261.html.
36. Hartog J., Ferrer-i-Carbonell A., and Jonker N. Linking measured risk aversion to individual characteristics. Kyklos 55 (2002) 3-26
37. Heinemann F. Measuring risk aversion and the wealth effect. In: Cox J.C., and Harrison G.W. (Eds). Risk Aversion in Experiments. Research in Experimental Economics vol. 12 (2007), Bingley, Emerald, UK 293-313
38. Hey J.D. Why we should not be silent about noise. Experimental Economics 8 (2005) 325-345
39. Holt C.A., and Laury S.K. Risk aversion and incentive effects. American Economic Review 92 (2002) 1644-1655
40. Holt C.A., and Laury S.K. Risk aversion and incentive effects: new data without order effects. American Economic Review 95 (2005) 902-904
41. Jullien B., and Salanié B. Estimating preferences under risk: the case of racetrack bettors. Journal of Political Economy 108 (2000) 503-529
42. Kahneman D., and Tversky A. Prospect theory: an analysis of decision under risk. Econometrica 47 (1979) 263-292
43. Kapteyn, A., Teppa, F., 2002. Subjective Measures of Risk Aversion and Portfolio Choice. CentER Working Paper 2002-11, Available at: http://greywww.uvt.nl:2080/greyfiles/center/2002/doc/11.pdf.
44. Kapteyn A., and Teppa F. Hypothetical intertemporal consumption choices. Economic Journal 113 (2003) 140-152
45. Komlos J., Smith P.K., and Bogin B. Obesity and the rate of time preference: is there a connection?. Journal of Biosocial Science 36 (2003) 209-219
46. Kreps D.M., and Porteus E.L. Temporal resolution of uncertainty and dynamic choice theory. Econometrica 46 (1978) 185-200
47. Lazaro A., Barberan R., and Rubio E. Private and social time preferences for health and money: an empirical estimation. Health Economics Letters 10 (2001) 351-356
48. Laibson D. Golden eggs and hyperbolic discounting. Quarterly Journal of Economics 112 (1997) 443-477
49. List J.A., and Gallet C.A. What experimental protocol influence disparities between actual and hypothetical stated values?. Environmental and Resource Economics 20 (2001) 241-254
50. Loewenstein G., and Prelec D. Anomalies in intertemporal choice: evidence and an interpretation. Quarterly Journal of Economics 107 (1992) 573-597
51. Loomes G. Modelling the stochastic component of behaviour in experiments: some issues for the interpretation of data. Experimental Economics 8 (2005) 301-323
52. Meyer D.J., and Meyer J. Relative risk aversion: what do we know?. Journal of Risk and Uncertainty 31 (2005) 243-262
53. Pålsson A. Does the degree of relative risk aversion vary with household characteristics?. Journal of Economic Psychology 17 (1996) 771-787
54. Pender J.L. Discount rates and credit markets: theory and evidence from rural India. Journal of Development Economics 50 (1996) 257-296
55. Picone G., Sloan F., and Taylor J. Effects of risk and time preference and expected longevity on demand for medical tests. Journal of Risk and Uncertainty 28 (2004) 39-53
56. Plott C.R. Rational individual behavior in markets and social choice processes: the discovered preference hypothesis. In: Arrow K., Colombatto E., Perleman M., and Schmidt C. (Eds). Rational Foundations of Economic Behavior (1996), Macmillan and St. Martins, London 225-250
57. Rabin M. Risk aversion and expected-utility theory: a calibration theorem. Econometrica 68 (2000) 1281-1292
58. Rabin M., and Thaler R.H. Anomalies: risk aversion. Journal of Economic Perspectives 15 (2001) 219-232
59. Rabin M., and Thaler R.H. Response [anomalies: risk aversion]. Journal of Economic Perspectives 16 (2002) 229-230
60. Read D. Is time-discounting hyperbolic or subadditive?. Journal of Risk and Uncertainty 23 (2001) 5-32
61. Read D., and Read N.L. Time discounting over the lifespan. Organizational Behavior and Human Decision Processes 94 (2004) 22-32
62. Rubinstein A. Dilemmas of an economic theorist. Econometrica 74 (2006) 865-883
63. Schechter L. Risk aversion and expected-utility theory: a calibration exercise. Journal of Risk and Uncertainty 35 (2007) 67-76
64. Schmidt U., and Hey J.D. Are preference reversals errors? An experimental investigation. Journal of Risk and Uncertainty 29 (2004) 207-218
65. Trostel P.A., and Taylor G.A. A theory of time preference. Economic Inquiry 39 (2001) 379-395
66. Tu, Q., 2005. Emperical Analysis of time Preferences and Risk Aversion. CentER PhD Thesis 142, Tilburg University.
67. Tversky A., and Kahneman D. Advances in prospect theory: cumulative representations of uncertainty. Journal of Risk and Uncertainty 5 (1992) 297-323
68. van Praag B.M.S. The welfare function of income in Belgium: an empirical investigation. European Economic Review 2 (1971) 337-369
69. van Praag B.M.S., Frijters P., and Ferrer-i-Carbonell A. The anatomy of subjective well-being. Journal of Economic Behavior and Organization 51 (2003) 29-49
70. van Praag, B.M.S., Booij, A.S., 2003. Risk Aversion and the Subjective Time Discount Rate: A Joint Approach. Tinbergen Institute Working Paper Series 03-018.
71. Wakker, P.P., 2005. Formalizing Reference Dependence and Initial Wealth in Rabin's Calibration Theorem. Working Paper, Econometric Institute, Erasmus University, http://people.few.eur.nl/wakker/pdf/calibcsocty05.pdf.
72. Wakker P.P. Explaining the characteristics of the power (CRRA) utility family. Health Economics 17 (2008) 1329-1344
73. Wärneryd K. Risk attitudes and risky behavior. Journal of Economic Psychology 17 (1996) 749-770
74. Weil P. Nonexpected utility in macroeconomics. The Quarterly Journal of Economics 105 (1990) 29-42