A Relationship Between Risk And Time Preferences

Date Added: Jun 2009
Format: PDF

This paper investigates a general relationship between risk and time preferences. The author considers a decision maker who chooses a one-time consumption. The author assumes however, that he believes both that today's good is certain, and that, as the promised date for future goods becomes increasingly distant, the probability of his consuming the goods decreases continuously to zero. For example, the probability might be the subjective mortality rate of a decision maker or the objective hazard rate of future goods.