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Robustness of Experimental Risk and Time Preferences to Intertemporal Asset Integration

Christoph Heinzel () and Aj Allen Bostian ()
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Christoph Heinzel: SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires - AGROCAMPUS OUEST - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Aj Allen Bostian: University of Tampere

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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
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-02785214
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Published in European Group of Risk and Insurance Economists, 45th annual seminar, European Group of Risk and Insurance Economists (EGRIE). CHE., Sep 2018, Nuremberg, Germany. 34 p

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