Risk Preferences Are Not Time Preferences: Separating Risk and Time Preference: Comment
American Economic Review · 2015 · Volume 105 · Issue 7
Abstract
Andreoni and Sprenger (2012a,b) observe that utility functions are distinct for risk and time preferences, and show that their findings are consistent with a preference for certainty. We revisit this question in an enriched experimental setting in which subjects make intertemporal decisions under different risk conditions. The observed choice behavior supports a separation between risk attitude and intertemporal substitution rather than a preference for certainty. We further show that several models, including Epstein and Zin (1989); Chew and Epstein (1990); and Halevy (2008) exhibit such a separation and can account for the overall experimental findings. (JEL C91, D81, D91)
Keywords
Design of Experiments: Laboratory, Individual, Criteria for Decision-Making under Risk and Uncertainty, Intertemporal Household Choice, Life Cycle Models and Saving
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