Random Discounted Expected Utility

Jose Apesteguia; Miguel Á. González Ballester; Ángelo Gutiérrez-daza

doi:10.1162/rest_a_01495

Random Discounted Expected Utility

Jose Apesteguia¹; Miguel Á. González Ballester²; Ángelo Gutiérrez-daza³

¹ ICREA, Universitat Pompeu Fabra and BSE [email protected] · ² University of Oxford [email protected] · ³ Banco de México [email protected]

The Review of Economics and Statistics 2024 open access

Abstract This paper introduces the random discounted expected utility (R-DEU) model, which we have developed as a means to deal with heterogeneous risk and time preferences. The R-DEU model provides an explicit linkage between preference and choice heterogeneity. We prove it has solid comparative statics, discuss its identification, and demonstrate its computational convenience. Finally, we use two distinct experimental datasets to illustrate the advantages of the R-DEU model over common alternatives for estimating heterogeneity in preferences across individuals.

DOI: 10.1162/rest_a_01495
Pages: 1-44
Language: en
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