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Random intertemporal choice

Jay Lu () and Kota Saito

Journal of Economic Theory, 2018, vol. 177, issue C, 780-815

Abstract: We provide a theory of random intertemporal choice. Agents exhibit stochastic choice over consumption due to preference shocks to discounting attitudes. We first demonstrate how the distribution of these preference shocks can be uniquely identified from random choice data. We then provide axiomatic characterizations of some common random discounting models, including exponential and quasi-hyperbolic discounting. In particular, we show how testing for exponential discounting under stochastic choice involves checking for both a stochastic version of stationarity and a novel axiom characterizing decreasing impatience.

Keywords: Stochastic choice; Intertemporal choice; Discounting; Stationarity (search for similar items in EconPapers)
JEL-codes: D8 D9 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:jetheo:v:177:y:2018:i:c:p:780-815