Strotz Meets Allais: Diminishing Impatience and the Certainty Effect: Comment

Kota Saito

American Economic Review, 2011, vol. 101, issue 5, 2271-75

Abstract: Halevy (2008) states the equivalence between diminishing impatience (i.e., quasi-hyperbolic discounting) and the common ratio effect. The present paper shows that one way of the equivalence is false and shows the correct and general relationships: diminishing impatience is equivalent to the certainty effect and that strong diminishing impatience (i.e., hyperbolic discounting) is equivalent to the common ratio effect. JEL: D81

Date: 2011
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