Strotz Meets Allais: Diminishing Impatience and the Certainty Effect: Comment
American Economic Review · 2011 · Volume 101 · Issue 5
Abstract
Halevy (2008) states the equivalence between diminishing impatience (i.e., quasi-hyperbolic discounting) and the common ratio effect. The present paper shows that one way of the equivalence is false and shows the correct and general relationships: diminishing impatience is equivalent to the certainty effect and that strong diminishing impatience (i.e., hyperbolic discounting) is equivalent to the common ratio effect. JEL: D81
Keywords
Criteria for Decision-Making under Risk and Uncertainty
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