Technical Note—On the Evaluation of Intertemporal Lotteries

Stephen C. Hora and Larry M. Austin
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Stephen C. Hora: Texas Tech University, Lubbock, Texas
Larry M. Austin: Texas Tech University, Lubbock, Texas

Operations Research, 1983, vol. 31, issue 4, 779-782

Abstract: We consider the evaluation of intertemporal lotteries using two tools: a single univariate utility function and a set of discount coefficients. If each of the lotteries consists of a single stochastic return to be received in a future period, then these tools are sufficient only if the utility function exhibits constant proportional risk aversion. Further, if the lotteries involve returns in more than one time period, we demonstrate that the tools are sufficient if, and only if, the utility function is linear.

Keywords: 91 decision analysis in intertemporal lotteries; 851 utility/preference theory in intertemporal lotteries (search for similar items in EconPapers)
Date: 1983
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Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:31:y:1983:i:4:p:779-782

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