Testable Implications of Models of Intertemporal Choice: Exponential Discounting and Its Generalizations
We present revealed-preference characterizations of the most common models of intertemporal choice: the model of exponentially discounted concave utility, and some of its generalizations. Our characterizations take consumption data as primitives, and provide nonparametric revealed-preference tests. We apply our tests to data from two recent experiments and find that our axiomatization delivers new insights and perspectives on datasets that had been analyzed by traditional parametric methods.
Additional Information© 2020 American Economic Association. Michael Ostrovksy was coeditor for this article. We thank Kim Border and Chris Chambers for inspiration and advice. This paper subsumes the paper "Testable Implication of Exponential Discounting" (2014) circulated as Caltech Social Science Working Paper 1381. The authors wish to thank Jim Andreoni and Charlie Sprenger for their many detailed comments on a previous draft, and discussions that really benefited our paper. We are also grateful for the feedback provided by seminar audiences in the many different places where we have presented the paper. Echenique thanks the National Science Foundation for its support through the grants SES 1558757 and CNS-1518941. Imai is grateful for financial support from the the Nakajima Foundation and the Deutsche Forschungsgemeinschaft through CRC TRR 190. Saito thanks the National Science Foundation for its support through the grants SES 1558757 and SES 1919263.
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