Intertemporal choice is intuitively analogous to choice under risk/uncertainty when outcomes are viewed as consequences received in an uncertain future. "Discounted incremental utility" (DIU) model of intertemporal choice parallels expected utility representation of risk preferences. DIU...

Nontrivial decision problems typically involve a trade-off among multiple attributes of choice options. One simple way of resolving such trade-offs is to aggregate multiple attributes into one real-valued index, known as weighted or separable utility. Applications of weighted utility can be...

Base-rate neglect is a robust experimental finding that individuals do not update their prior beliefs according to the Bayes' rule and, typically, underestimate their posterior probabilities. Another empirical finding is that individuals often do not acquire information even when there are no...

This paper considers intertemporal choice when the timing of future events cannot be objectively (chronologically) measured a priori and presents foundations of subjective time measurement. If preferences of a decision maker satisfy certain behavioral assumptions, then this decision maker...

We here estimate a number of alternatives to discounted-utility theory, such as quasi-hyperbolic discounting, generalized hyperbolic discounting, and rank-dependent discounted utility with three different models of probabilistic choice. The data come from a controlled laboratory experiment...

A stream of intertemporal monetary payoffs X first-order (second-order) temporarily dominates another stream Y if (the area below) the cumulative payoff function of X up till any moment of time is always at least as high as that of Y; or, equivalently, any rank-dependent discounted utility...

A new model of intertemporal choice — "discounted incremental utility" (DIU) — is presented. DIU coincides with Samuelson's discounted utility (constant/exponential discounting) when utility function is linear. DIU has several advantages over discounted utility (and its generalizations —...

When is an individual A clearly more patient than an individual B? Three answers appear to be natural. First, whenever B is willing to undertake some investment project, A is moreover so. Second, for any stream of monetary payoffs, A's present-day equivalent is at least as high as that of B....

Discounted utility theory and its generalizations (e.g., quasihyperbolic discounting, generalized hyperbolic discounting) use discount functions for weighting utilities of outcomes received in different time periods. We propose a new simple test of convexity-concavity of discount function. This...

Standard econometric models of discrete choice (such as Fechner model of random errors, Luce’s choice model and random utility or random preference approach) are not well suited for applications to intertemporal choice. This paper proposes a new model that does not violate temporal dominance,...