Modeling Interactions between Risk, Time, and Social Preferences

Abstract

Recent studies have observed systematic interactions between risk, time, and social preferences that constitute violations of `dimensional independence' and are not explained by the leading models of decision making. This note provides a simple approach to modeling such interaction eects while predicting new ones. In particular, we present a model of rational-behavioral preferences that takes the convex combination of `behavioral' System 1 preferences and `rational' System 2 preferences. The model provides a unifying approach to analyzing risk, time, and social preferences, and predicts how these preferences are correlated with reliance on System 1 or System 2 thinking.

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