Paper # Author Title
We study preferences over lotteries that pay a speci fic prize at uncertain future dates: time lotteries. The standard model of time preferences, Expected Discounted Utility (EDU), implies that individuals must be risk seeking in this case. As a motivation, we show in an incentivized experiment that most subjects exhibit the opposite behavior, i.e., they are risk averse over time lotteries (RATL). We then make two theoretical contributions. First, we show that RATL can be captured by a generalization of EDU that is obtained by keeping the postulates of Discounted Utility and Expected Utility. Second, we introduce a new property termed Stochastic Impatience, a risky counterpart of standard Impatience, and show that not only the model above, but also substantial generalizations that allow for non-Expected Utility and non exponential discounting, cannot jointly accommodate it and RATL, showing a fundamental tension between the two. Download Paper
This online appendix provides additional proofs, extensions, and all experiment instructions and questionnaire. Download Paper
We study preferences over lotteries that pay a specific prize at uncertain dates. Expected Utility with convex discounting implies that individuals prefer receiving $x in a random date with mean t over receiving $x in t days for sure. Our experiment rejects this prediction. It suggests a link between preferences for payments at certain dates and standard risk aversion. Epstein-Zin (1989) preferences accommodate such behavior, and fit the data better than a model with probability weighting. We thus provide another justification for disentangling attitudes toward risk and time, as in Epstein-Zin, and suggest new theoretical restrictions on its key parameters. Download Paper