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Probability and time trade-off / Manel Baucells in Management science, Vol. 58 N° 4 (Avril 2012) 

Public ISBD [article]  in Management science > Vol. 58 N° 4 (Avril 2012) . - pp. 831-842 Titre : Probability and time trade-off Type de document : texte imprimé Auteurs : Manel Baucells, Auteur ; Franz H. Heukamp, Auteur Année de publication : 2012 Article en page(s) : pp. 831-842 Note générale : Management Langues : Anglais (eng) Mots-clés : Risk  preferences  Time  preferences  Probability  discount  rate  Subendurance  Magnitude  effect  Psychological  distance Résumé : Probability and time are integral dimensions of virtually any decision. To treat them together, we consider the prospect of receiving outcome x with a probability p at time t. We define risk and time distance, and show that if these two distances are traded off linearly, then preferences are characterized by three functions: a value function, a probability discount rate function, and a psychological distance function. The concavity of the psychological distance function explains the common ratio and common difference effects. A decreasing probability discount rate accounts for the magnitude effect. The discount rate and the risk premium depend on the shape of these three functions. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/4/831.abstract [article] Probability and time trade-off [texte imprimé] / Manel Baucells, Auteur ; Franz H. Heukamp, Auteur . - 2012 . - pp. 831-842. Management Langues : Anglais (eng) in Management science > Vol. 58 N° 4 (Avril 2012) . - pp. 831-842 Mots-clés : Risk  preferences  Time  preferences  Probability  discount  rate  Subendurance  Magnitude  effect  Psychological  distance Résumé : Probability and time are integral dimensions of virtually any decision. To treat them together, we consider the prospect of receiving outcome x with a probability p at time t. We define risk and time distance, and show that if these two distances are traded off linearly, then preferences are characterized by three functions: a value function, a probability discount rate function, and a psychological distance function. The concavity of the psychological distance function explains the common ratio and common difference effects. A decreasing probability discount rate accounts for the magnitude effect. The discount rate and the risk premium depend on the shape of these three functions. DEWEY : 658 ISSN : 0025-1909 En ligne : http://mansci.journal.informs.org/content/58/4/831.abstract