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Intertemporal Tradeoffs for Gains and Losses: An Experimental Measurement of Discounted Utility

This article provides a parameter-free measurement of utility in intertemporal choice and presents new and more robust evidence on the discounting of money outcomes. Intertemporal utility was concave for gains and convex for losses, consistent with a hypothesis put forward by Loewenstein and Prelec...

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Published in:	The Economic journal (London) 2010-06, Vol.120 (545), p.845-866
Main Authors:	Abdellaoui, Mohammed, Attema, Arthur E., Bleichrodt, Han
Format:	Article
Language:	English
Subjects:	Discount rates Discounting Discounts domain_shs.eco.eco Economic models Economic utility Economics and Finance Empirical evidence Gains Humanities and Social Sciences Intertemporal utility Losses Management science Mathematical economics Microeconomics Statistical median Studies Tradeoff analysis Tradeoffs Utility functions Utility measurement Utility models Utility rates Utility theory
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cited_by	cdi_FETCH-LOGICAL-c6058-52a1263ad8cc1597eff14877face5def04dc028828a191f6a42e317acf6d63c63
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container_issue	545
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container_title	The Economic journal (London)
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creator	Abdellaoui, Mohammed Attema, Arthur E. Bleichrodt, Han
description	This article provides a parameter-free measurement of utility in intertemporal choice and presents new and more robust evidence on the discounting of money outcomes. Intertemporal utility was concave for gains and convex for losses, consistent with a hypothesis put forward by Loewenstein and Prelec (1992) . Discount rates declined over time but less so than previously observed under the assumption of linear utility. For approximately 40% of our subjects constant discounting provided the best fit. The remaining 60% were most consistent with Harvey's (1986) power discounting. Our data provide little support for the popular quasi-hyperbolic model, which is widely used in economics today. We observed an asymmetry in the discounting of gains and losses that, unlike earlier findings, cannot be explained by a framing effect.
doi_str_mv	10.1111/j.1468-0297.2009.02308.x
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source	EconLit s plnými texty; International Bibliography of the Social Sciences (IBSS); Business Source Ultimate【Trial: -2024/12/31】【Remote access available】; JSTOR Archival Journals and Primary Sources Collection; Oxford Journals Online
subjects	Discount rates Discounting Discounts domain_shs.eco.eco Economic models Economic utility Economics and Finance Empirical evidence Gains Humanities and Social Sciences Intertemporal utility Losses Management science Mathematical economics Microeconomics Statistical median Studies Tradeoff analysis Tradeoffs Utility functions Utility measurement Utility models Utility rates Utility theory
title	Intertemporal Tradeoffs for Gains and Losses: An Experimental Measurement of Discounted Utility
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