Heterogeneous risk and time preferences

Alina Ferecatu () and Ayse Önçüler ()
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Alina Ferecatu: Erasmus University
Ayse Önçüler: ESSEC Business School

Journal of Risk and Uncertainty, 2016, vol. 53, issue 1, No 1, 28 pages

Abstract: Abstract Assessing individuals’ time and risk preferences is crucial in domains such as health-related decisions (e.g., dieting, addictions), environmentally-friendly practices, and saving opportunities. We propose a new method to jointly elicit and estimate risk attitudes and intertemporal choices. We use a novel individual level estimation procedure based on a hierarchical Bayes methodology, which can integrate different functional forms for discounting and risk attitudes. This method provides individual level estimates, and allows us to explore the heterogeneity in the data. In addition, we report a negative correlation between risk and time preferences, implying that risk-seeking individuals are less patient and less willing to defer consumption.

Keywords: Risk and time; Risk preferences; Intertemporal choice; Joint elicitation; Hierarchical Bayes; Heterogeneity; D81; D90; C11 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (18)

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DOI: 10.1007/s11166-016-9243-x

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