Recent Developments in Intertemporal Choice Theory

Norio Takeoka

Economic Review, 2021, vol. 72, issue 2, 140-158

Abstract: In economics, the exponential discounting has been used as a standard model for intertemporal choice. However, experimental and empirical studies report numerous anomalies for the exponential discounting model. This study overviews how the intertemporal choice model has been developed to accommodate those anomalies such as the common difference effect, the magnitude effect, separation of attitudes between risk and intertemporal substitution, the equity premium puzzle and the risk-free rate puzzle, additive separability across time, and attitudes toward time lotteries. In particular, we will explain in detail the authorʼs research （Noor and Takeoka（2020））, called the costly empathy model, which is motivated to accommodate the magnitude effect.

JEL-codes: D11 D81 D91 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:hit:ecorev:v:72:y:2021:i:2:p:140-158

DOI: 10.15057/71668

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