Time discounting under uncertainty
Theoretical Economics
2020-03-13 v2
Abstract
We study intertemporal decision making under uncertainty. We fully characterize discounted expected utility in a framework \`a la Savage. Despite the popularity of this model, no characterization is available in this setting. The concept of stationarity, introduced by Koopmans for deterministic discounted utility, plays a central role for both attitudes towards time and towards uncertainty. We show that a strong stationarity axiom characterizes discounted expected utility. When hedging considerations are taken into account, a weaker stationarity axiom generalizes discounted expected utility to Choquet discounted expected utility, allowing for non-neutral attitudes towards uncertainty.
Cite
@article{arxiv.1911.00370,
title = {Time discounting under uncertainty},
author = {Lorenzo Bastianello and José Heleno Faro},
journal= {arXiv preprint arXiv:1911.00370},
year = {2020}
}