Cognitive Uncertainty in Intertemporal Choice

Neural dissociation of delay and uncertainty in intertemporal choice.

Decision makers often face choices whose consequences unfold over time. To explore the neural basis of such intertemporal choice behavior, we devised a novel two-alternative choice task with probabilistic reward delivery and contrasted two conditions that differed only in whether the outcome was revealed immediately or after some delay. In the immediate condition, we simply varied the reward pr...

Optimal Consumption Choice under Uncertainty with Intertemporal Substitution†

We extend the analysis of the intertemporal utilitymaximization problem for HindyHuang-Kreps utilities reported in Bank and Riedel (1998) to the stochastic case. Existence and uniqueness of optimal consumption plans are established under arbitrary convex portfolio constraints, including the cases of both complete and incomplete markets. For the complete market setting, Kuhn-Tucker-like necessar...

Essays on Decision Making: Intertemporal Choice and Uncertainty

This paper studies the effect of learning new information on peoples beliefs and their attitudes towards ambiguity. We propose a method to separate ambiguity attitudes from subjective probabilities and to decompose ambiguity attitudes into pessimism (capturing ambiguity aversion) and likelihood insensitivity. We apply our method in an experiment where we elicit the ask prices of options with pa...

Intertemporal Choice

Intangibility in intertemporal choice.

Since the advent of the discounted utility (DU) model, economists have thought about intertemporal choice in very specific terms. DU assumes that people make explicit trade-offs between costs and benefits occurring at different points in time. While this explicit trade-off perspective is simple and tractable, and has stimulated productive research, it does not provide a very realistic represent...