Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245396 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9215
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We formulate a general theory of preferences over outcome-time-probability triplets and decompose uncertainty into risk and hazard. We define the delay, defer, shift and certainty functions that can be uniquely elicited from behaviour. These individually determine stationarity, the common difference effect and its converse; constant, decreasing and increasing impatience; additivity, subadditivity and super additivity; probability independence, the certainty effect and its converse. We propose a general discounted utility model which encompasses the main empirically supported discounted utility models. We show that our axioms on preferences are satisfied in our general discounted utility model. Finally, we discuss the various explanations of the common difference effect.
Subjects: 
time preferences
preferences under uncertainty
discounted utility models
common difference effect
impatience
additivity
certainty effect
probability weighting function
survival function
JEL: 
D15
D91
D81
Document Type: 
Working Paper
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