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Journal articles (2016), Journal of Risk and Uncertainty, 53 (1), pp. 1-28

Heterogeneous Risk and Time Preferences

FERECATU A., ÖNCÜLER Ayse

Assessing individuals’ time and risk preferences is crucial in domains such as health-related decisions (e.g., dieting, addictions), environmentally-friendly practices, and saving opportunities. We propose a new method to jointly elicit and estimate risk attitudes and intertemporal choices. We use a novel individual level estimation procedure based on a hierarchical Bayes methodology, which can integrate different functional forms for discounting and risk attitudes. This method provides individual level estimates, and allows us to explore the heterogeneity in the data. In addition, we report a negative correlation between risk and time preferences, implying that risk-seeking individuals are less patient and less willing to defer consumption.

FERECATU, A. and ÖNCÜLER, A. (2016). Heterogeneous Risk and Time Preferences. Journal of Risk and Uncertainty, 53(1), pp. 1-28.