Intertemporal discrete choice

Pennesi, Daniele (2016) Intertemporal discrete choice. Bologna: Dipartimento di Scienze economiche DSE, p. 35. DOI 10.6092/unibo/amsacta/4715. In: Quaderni - Working Paper DSE (1061). ISSN 2282-6483.
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Abstract

The discounted logit is widely used to estimate time preferences using data from field and laboratory experiments. Despite its popularity, it exhibits the "problem of the scale": choice probabilities depend on the scale of the value function. When applied to intertemporal choice, the problem the scale implies that logit probabilities are sensitive to the temporal distance between the choice and the outcomes. This is a failure of an intuitive requirement of stationarity although future values are discounted geometrically. As a consequence, patterns of choice following from the structure of the logit may be attributed to non-stationary discounting. We solve this problem introducing the discounted Luce rule. It retains the flexibility and simplicity of the logit while it satisfies stationarity. We characterize the model in two settings: dated outcomes and consumption streams. Relaxations of stationarity give observable restrictions characterizing hyperbolic and quasi-hyperbolic discounting. Lastly, we discuss an extension of the model to recursive stochastic choices with the present bias.

Abstract
Tipologia del documento
Monografia (Working paper)
Autori
AutoreAffiliazioneORCID
Pennesi, Daniele
Parole chiave
Discrete Choice, Intertemporal Choice, Quasi-hyperbolic Discounting
Settori scientifico-disciplinari
ISSN
2282-6483
DOI
Data di deposito
29 Feb 2016 11:34
Ultima modifica
07 Giu 2017 08:49
URI

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