Stochastic Impatience and the Separation of Time and Risk Preferences

David Dillenberger, Daniel Gottlieb () and Pietro Ortoleva
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David Dillenberger: University of Pennsylvania
Pietro Ortoleva: Princeton University

Working Papers from Princeton University. Economics Department.

Abstract: We study how the separation of time and risk preferences relates to a behavioral property that generalizes impatience to stochastic environments: Stochastic Impatience. We show that, within a broad class of models, Stochastic Impatience holds if and only if risk aversion is "not too high" relative to the inverse elasticity of intertemporal substitution. This result has implications for many known models. For example, for those of Epstein and Zin (1989) and Hansen and Sargent (1995), Stochastic Impatience is violated for all commonly used parameters.

Keywords: Stochastic Impatience; Epstein-Zin preferences; Separation of Time and Risk preferences; Risk Sensitive preferences; Non-Expected Utility (search for similar items in EconPapers)
JEL-codes: D81 D90 E7 G11 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-mic, nep-rmg and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://pietroortoleva.com/papers/SIvsTimeRisk.pdf

Related works:
Working Paper: Stochastic Impatience and the Separation of Time and Risk Preferences (2020)
Working Paper: Stochastic Impatience and the Separation of Time and Risk Preferences (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:econom:2020-54

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