An Experimental Analysis of Intertemporal Allocation Behavior

If the future is uncertain, optimal intertemporal decisions rely on anticipating one's own optimal future behavior as is typical in dynamic programming. Our aim is to detect experimentally stylized facts about intertemporal decision making in a rich stochastic environment. Compared to previous...

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Bibliographic Details
Published in:Experimental economics : a journal of the Economic Science Association 2000-10, Vol.3 (2), p.137-152
Main Authors: Strobel, Martin, Anderhub, Vital, Gäuth, Werner, Mäuller, Wieland
Format: Article
Language:English
Subjects:
Behavior
Decision making
Decision making models
Dynamic programming
Economic theory
Economics
Expenditures
Experiments
intertemporal allocation behavior
Stochastic models
Studies
Termination
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Summary:If the future is uncertain, optimal intertemporal decisions rely on anticipating one's own optimal future behavior as is typical in dynamic programming. Our aim is to detect experimentally stylized facts about intertemporal decision making in a rich stochastic environment. Compared to previous experimental studies our experimental design is more complex since the time horizon is uncertain and termination probabilities have to be updated. In particular the decision task is non-stationary as in real life which seriously complicates the task of diagnosing behavioral regularities. In this study we give some illustrative results and provide some general perspectives. Our main result is that subjects'reaction to information about termination probablilities are qualitatively correct. Copyright Kluwer Academic Publishers 2000
ISSN:1386-4157
1573-6938
DOI:10.1023/A:1026589319018