A Stream of Prospects or a Prospect of Streams: On the Evaluation of Intertemporal Risks
NBER Working Paper No. 24075
Recent debate has identified important gaps in the understanding of intertemporal risks. Critical to closing these gaps is evidence on which dimension of intertemporal risk – the risk or the time – is evaluated first. Though under discounted expected utility this ordering is of no consequence, under discounted non-expected utility models the order of evaluation is critical. We provide experimental tests in which different orderings of evaluation generate different predictions for behavior. We find more support for the notion that the risk dimension is evaluated first.
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Document Object Identifier (DOI): 10.3386/w24075