Dynamic Preference Foundations of Expected Exponentially-Discounted Utility

Craig Webb

Economics Discussion Paper Series from Economics, The University of Manchester

Abstract: Expected exponentially-discounted utility (EEDU) is the standard model of choice over risk and time in economics. This paper considers the dynamic preference foundations of EEDU in the timed risks framework. We first provide dynamic preference foundations for a time-invariant expected utility representation. The new axioms for this are called foregone-risk independence and strong time invariance. This class of dynamic preferences includes EEDU as a special case. If foregone-risk independence is strengthened to a new condition called conditional consistency, then an EEDU representation results. Alternative approaches for extending exponential discounting axioms to risk are considered, resulting in five new preference foundations of EEDU.

Date: 2023-05
New Economics Papers: this item is included in nep-dcm, nep-mic and nep-upt
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Journal Article: Dynamic preference foundations of expected exponentially-discounted utility (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:man:sespap:2303

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