A Relationship Between Risk and Time Preferences

This paper investigates a general relationship between risk and time preferences. I consider a decision maker who chooses between consumption of a particular prize in one period and a different prize in another period. The individual believes that today’s good is certain, and that, as the promised date for a future good becomes increasingly distant, the probability of his consuming the good decreases. Under these assumptions, this paper shows that the individuals exhibits the common ratio effect, the certainty effect, and the expected utility if and only if he discounts hyperbolically, quasi-hyperbolically and exponentially, respectively.Allais paradox, hyperbolic discounting

Axiomatizations of the Mixed Logit Model

A mixed logit function, also known as a random-coefficients logit function, is an integral of logit functions. The mixed logit model is one of the most widely used models in the analysis of discrete choice. Observed behavior is described by a random choice function, which associates with each choice set a probability measure over the choice set. I obtain several necessary and sufficient conditions under which a random choice function becomes a mixed logit function. One condition is easy to interpret and another condition is easy to test

Preferences for Flexibility and Randomization under Uncertainty

An uncertainty-averse agent prefers betting on an event whose probability is known, to betting on an event whose probability is unknown. Such an agent may randomize his choices to eliminate the effects of uncertainty. For what sort of preferences does a randomization eliminate the effects of uncertainty? To answer this question, we investigate an agent's preferences over sets of acts. We axiomatize a utility function, through which we can identify the agent's subjective belief that a randomization eliminates the effects of uncertainty

Social Preferences under Risk: Equality of Opportunity versus Equality of Outcome

This paper axiomatizes a utility function for social preferences under risk. In the model, a single parameter captures a preference for equality of opportunity (i.e., equality of exante expected payoffs) relative to equality of outcome (i.e., equality of ex-post payoffs). In a deterministic environment, the model reduces to the model of Fehr and Schmidt (1999). The model is consistent with recent experiments on probabilistic dictator games