Multiattribute Utility Theory, Intertemporal Utility and Correlation Aversion

Andersen, S.; Harrison, G.W.; Lau, M.; Rutström, E.E.

Abstract

Convenient assumptions about qualitative properties of the intertemporal utility function have generated counter-intuitive implications for the relationship between atemporal risk aversion and the intertemporal elasticity of substitution. If the intertemporal utility function is additively separable then the latter two concepts are the inverse of each other. We review a theoretical specification with a long lineage in the literature on multi-attribute utility and use this theoretical structure to guide the design of a series of experiments that allow us to identify and estimate intertemporal correlation aversion. Our results show that subjects are correlation averse over lotteries with intertemporal income profiles.

Citation

Andersen, S., Harrison, G., Lau, M., & Rutström, E. (2018). Multiattribute Utility Theory, Intertemporal Utility and Correlation Aversion. International Economic Review, 59(2), 537-555. https://doi.org/10.1111/iere.12279

• Journal Article Type: Article
• Acceptance Date: Nov 29, 2016
• Online Publication Date: May 3, 2018
• Publication Date: May 1, 2018
• Deposit Date: Nov 30, 2016
• Publicly Available Date: Feb 8, 2020
• Journal: International Economic Review
• Print ISSN: 0020-6598
• Electronic ISSN: 1468-2354
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 59
• Issue: 2
• Pages: 537-555
• DOI: https://doi.org/10.1111/iere.12279
• Public URL: https://durham-repository.worktribe.com/output/1391871