Uncertain lifetime and intertemporal choice: risk aversion as a rationale for time discounting

Antoine Bommier

Research Unit Working Papers from Laboratoire d'Economie Appliquee, INRA

Abstract: This paper makes explicit the links between preferences over lotteries on length of life and intertemporal choice. I show that the approach used by traditional life cycle models to account for uncertain survival corresponds to a strong assumption of risk neutrality with respect to the length of life. Relaxing such an assumption leads us to develop a more general formulation of lifetime utility in which time preferences are directly related to preferences over length of life. In particular, it provides an explanation for exponential and hyperbolic discounting which are found to result, in a first approximation, from constant and hyperbolic risk aversion with respect to the length of life.

Keywords: Intertemporal choice; life cycle model; uncertain lifetime; time inconsistency; hyperbolic discounting. (search for similar items in EconPapers)
JEL-codes: D81 D91 J17 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2001-12
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.inra.fr/Internet/Departements/ESR/UR/lea/documents/wp/wp0108.pdf (application/pdf)

Related works:
Journal Article: UNCERTAIN LIFETIME AND INTERTEMPORAL CHOICE: RISK AVERSION AS A RATIONALE FOR TIME DISCOUNTING (2006)
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:lea:leawpi:0108

Access Statistics for this paper

More papers in Research Unit Working Papers from Laboratoire d'Economie Appliquee, INRA INRA-LEA, 48, Boulevard Jourdan, 75014 Paris, France.
Bibliographic data for series maintained by Madeleine Roux ( this e-mail address is bad, please contact ).