Random Discounted Expected Utility

Jose Apesteguia, Miguel A. Ballester and Ángelo Gutiérrez-Daza

No 2024-03, Working Papers from Banco de México

Abstract: This paper introduces the random discounted expected utility (RDEU) model, which we have developed as a means to deal with heterogeneous risk and time preferences. The RDEU model provides an explicit linkage between preference and choice heterogeneity. We prove it has solid comparative statics, discuss its identification, and demonstrate its computational convenience. Finally, we use two distinct experimental datasets to illustrate the advantages of the RDEU model over common alternatives for estimating heterogeneity in preferences across individuals.

Keywords: Heterogeneity; Risk Preferences; Time Preferences; Comparative Statics; Random Utility Models (search for similar items in EconPapers)
JEL-codes: C01 D01 (search for similar items in EconPapers)
Date: 2024-06
New Economics Papers: this item is included in nep-ecm, nep-evo and nep-mic
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