Robustness of Experimental Risk and Time Preferences to Intertemporal Asset Integration

Aj Allen Bostian and Christoph Heinzel ()
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Aj Allen Bostian: University of Tampere
Christoph Heinzel: SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires - INRA - Institut National de la Recherche Agronomique - AGROCAMPUS OUEST

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Abstract: We develop a structural model of intertemporal asset integration that simultaneously accounts for a participant's experimental and non-experimental incentives. We cast three of the major experimental designs for eliciting risk and time preferences into this framework, and examine how their predictions change as assumptions about asset integration change. We find that the original structural estimates are highly sensitive to the presence of background resources. To the extent that recursive utility is the correct model of behavior, none of the designs can explicitly account for the three preferences that operate simultaneously in that context: risk aversion, discounting, and consumption smoothing. Experimental decisions, including those from static risk tasks, probably depend more strongly on a participant's intertemporal preferences than originally thought.

Keywords: Risk aversion; Discount rate; Consumption smoothing; Asset integration; Experimental economics (search for similar items in EconPapers)
Date: 2018-09-17
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Published in 45th annual seminar of the European Group of Risk and Insurance Economists (EGRIE), Sep 2018, Nuremberg, Germany. 34 p

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02785214

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