Prospect Theory for Intertemporal Choice

Immanuel Lampe and Matthias Weber

Journal of the European Economic Association, 2026, vol. 24, issue 2, 701-735

Abstract: Prospect theory is well understood in contexts without a time dimension. In intertemporal contexts, however, it is unclear how prospect theory should be applied. In particular, it is unclear whether probabilities should be weighted within time periods or whether probabilities of discounted utilities (or present values) of outcome streams should be weighted. Furthermore, it is unclear what parametric specifications of probability weighting and utility functions should be used. We find in a pre-registered experiment on a representative sample that weighting probabilities of discounted utilities (or present values) predicts decisions best. The estimated probability weighting functions are inverse-S shaped, and the utility functions are almost linear.

Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/jeea/jvaf037 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:24:y:2026:i:2:p:701-735.

Access Statistics for this article

Journal of the European Economic Association is currently edited by Romain Wacziarg

More articles in Journal of the European Economic Association from European Economic Association
Bibliographic data for series maintained by Oxford University Press ().