On the Elicitation of Time Preference under Conditions of Risk

Abstract

Andreoni and Sprenger (2012) report evidence that distinct utility functions govern choices under certainty and risk. I investigate the robustness of this result to the experimental design. I find that the effect disappears completely when a multiple price list instrument is used instead of a convex time budget design. Alternatively, the effect is reduced by half when sooner and later payment risks are realized using a single lottery instead of two independent lotteries. The result is thus at least partially driven by intertemporal diversification, supporting an explanation in terms of concavity of the intertemporal, and not only atemporal, utility function.

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