In:
American Economic Review, American Economic Association, Vol. 105, No. 7 ( 2015-07-01), p. 2261-2271
Abstract:
In a recent experimental study of intertemporal risky decision making, Andreoni and Sprenger (2012) find that subjects exhibit a preference for intertemporal diversification, which is inconsistent with discounted expected utility theory. It was claimed that their results are also at odds with models involving probability weighting, such as rank-dependent utility and cumulative prospect theory. Here we demonstrate, however, that rank-dependent probability weighting explains intertemporal diversification if decision makers care about portfolio risk. Moreover, we provide a unified account of all of Andreoni and Sprenger's key findings. (JEL C91, D81, D91)
Type of Medium:
Online Resource
ISSN:
0002-8282
DOI:
10.1257/aer.20130420
Language:
English
Publisher:
American Economic Association
Publication Date:
2015
detail.hit.zdb_id:
203590-X
detail.hit.zdb_id:
2009979-4
