From Decision in Risk to Decision in Time - and Return: A Restatement of Probability Discounting

Marc-Arthur Diaye (), André Lapidus () and Christian Schmidt
Additional contact information
Marc-Arthur Diaye: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
André Lapidus: PHARE - Philosophie, Histoire et Analyse des Représentations Économiques - UP1 - Université Paris 1 Panthéon-Sorbonne
Christian Schmidt: PHARE - Philosophie, Histoire et Analyse des Représentations Économiques - UP1 - Université Paris 1 Panthéon-Sorbonne

Post-Print from HAL

Abstract: This paper aims to restate, in a decision theory framework, the results of some significant contributions of the literature on probability discounting that followed the publication of the pioneering article by Rachlin et al. We provide a restatement of probability discounting, usually limited to the case of 2-issues lotteries, in terms of rank-dependent utility, in which the utilities of the outcomes of n-issues lotteries are weighted by probabilities transformed after their transposition into time-delays. This formalism makes the typical cases of rationality in time and in risk mutually exclusive, but allows looser types of rationality. The resulting attitude toward probability and toward risk are then determined in relation to the values of the two parameters involved in the procedure of probability discounting: a parameter related to impatience and pessimism, and a parameter related to time-consistency and the separation between non-optimism and non-pessimism. A simulation illustrates these results through the characteristics of the transformation of probabilities function.

Keywords: Probability discounting; Time discounting; Logarithmic time perception; Rank-dependent utility; Rationality; Attitude toward probabilities; Attitude toward risk (search for similar items in EconPapers)
Date: 2024-10
New Economics Papers: this item is included in nep-rmg and nep-upt
Note: View the original document on HAL open archive server: https://paris1.hal.science/hal-03256606v2
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Theoretical Economics Letters, 2024, 14 (5), pp.2036-2065. ⟨10.4236/tel.2024.145101⟩

Downloads: (external link)
https://paris1.hal.science/hal-03256606v2/document (application/pdf)

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:hal:journl:hal-03256606

DOI: 10.4236/tel.2024.145101

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().