On the Interaction of Risk and Time Preferences: An Experimental Study
Werner Güth (),
Uri Gneezy and
Doron Sonsino ()
German Economic Review, 2001, vol. 2, issue 3, 239-253
Experimental studies of risk and time preference typically focus on one of the two phenomena. The goal of this paper is to investigate the (possible) correlation between subjects’ attitude to risk and their time preference. For this sake we ask 61 subjects to price a simple lottery in three different scenarios. At the first, the lottery premium is paid ‘now’. At the second, it is paid ‘later’. At the third, it is paid ‘even later‘. By comparing the certainty equivalents offered by the subjects for the three lotteries, we test how time and risk preferences are interrelated. Since the time interval between ‘now’ and ‘later’ is the same as between ‘later’ and ‘even later’, we also test the hypothesis of hyperbolic discounting. The main result is a statistically significant negative correlation between subjects’ degrees of risk aversion and their (implicit) discount factors. Moreover, we show that the negative correlation is independent of the method used to elicit certainty equivalents (willingness to pay versus willingness to accept).
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (81) Track citations by RSS feed
Downloads: (external link)
Working Paper: On the interaction of risk and time preferences: An experimental study (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:germec:v:2:y:2001:i:3:p:239-253
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1465-6485
Access Statistics for this article
German Economic Review is currently edited by Bernhard Felderer, Joseph F. Francois, Ivo Welch, Urs Schweizer and David E. Wildasin
More articles in German Economic Review from Verein für Socialpolitik Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().