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An Experimental Analysis of Intertemporal Allocation Behavior

Published online by Cambridge University Press:  14 March 2025

Vital Anderhub ,
Wieland Müller ,
Werner Güth  and
Martin Strobel
Vital Anderhub
Affiliation:
Humboldt University at Berlin, Department of Economics, Institute for Economic Theory III, Spandauer Strasse 1, 10178 Berlin, Germany
Wieland Müller
Affiliation:
Humboldt University at Berlin, Department of Economics, Institute for Economic Theory III, Spandauer Strasse 1, 10178 Berlin, Germany
Werner Güth
Affiliation:
Humboldt University at Berlin, Department of Economics, Institute for Economic Theory III, Spandauer Strasse 1, 10178 Berlin, Germany
Martin Strobel
Affiliation:
Humboldt University at Berlin, Department of Economics, Institute for Economic Theory III, Spandauer Strasse 1, 10178 Berlin, Germany
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Abstract

If the future is uncertain, optimal intertemporal decisions rely on anticipating one's own optimal future behavior as is typical in dynamic programming. Our aim is to detect experimentally stylized facts about intertemporal decision making in a rich stochastic environment. Compared to previous experimental studies our experimental design is more complex since the time horizon is uncertain and termination probabilities have to be updated. In particular the decision task is non-stationary as in real life which seriously complicates the task of diagnosing behavioral regularities. In this study we give some illustrative results and provide some general perspectives. Our main result is that subjects’ reaction to information about termination probablilities are qualitatively correct.

Keywords

intertemporal allocation behavior

JEL classification

C91: Laboratory, Individual Behavior D90: General‡ D81: Criteria for Decision-Making under Risk and Uncertainty

Information

Type
Research Article
Information
Experimental Economics , Volume 3 , Issue 2 , October 2000 , pp. 137 - 152
Copyright
Copyright © 2000 Economic Science Association

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