Next Article in Journal
Riccati Technique and Asymptotic Behavior of Fourth-Order Advanced Differential Equations
Next Article in Special Issue
The VIF and MSE in Raise Regression
Previous Article in Journal
Least-Square-Based Three-Term Conjugate Gradient Projection Method for 1-Norm Problems with Application to Compressed Sensing
Previous Article in Special Issue
Some Notes on the Formation of a Pair in Pairs Trading
Open AccessArticle

Discounted and Expected Utility from the Probability and Time Trade-Off Model

Departamento de Economía y Empresa, Universidad de Almería, La Cañada de San Urbano, s/n, 04120 Almería, Spain
*
Author to whom correspondence should be addressed.
La Cañada de San Urbano, s/n, 04120 Almería, Spain.
Mathematics 2020, 8(4), 601; https://doi.org/10.3390/math8040601
Received: 12 March 2020 / Revised: 12 April 2020 / Accepted: 13 April 2020 / Published: 15 April 2020
(This article belongs to the Special Issue Quantitative Methods for Economics and Finance)
This paper shows the interaction between probabilistic and delayed rewards. In decision- making processes, the Expected Utility (EU) model has been employed to assess risky choices whereas the Discounted Utility (DU) model has been applied to intertemporal choices. Despite both models being different, they are based on the same theoretical principle: the rewards are assessed by taking into account the sum of their utilities and some similar anomalies have been revealed in both models. The aim of this paper is to characterize and consider particular cases of the Time Trade-Off (PPT) model and show that they correspond to the EU and DU models. Additionally, we will try to build a PTT model starting from a discounted and an expected utility model able to overcome the limitations pointed out by Baucells and Heukamp. View Full-Text
Keywords: risk; delay; decision-making process; probability; discount risk; delay; decision-making process; probability; discount
Show Figures

Figure 1

MDPI and ACS Style

Cruz Rambaud, S.; Sánchez Pérez, A.M. Discounted and Expected Utility from the Probability and Time Trade-Off Model. Mathematics 2020, 8, 601.

Show more citation formats Show less citations formats
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

1
Search more from Scilit
 
Search
Back to TopTop