Multiattribute Utility Theory, Intertemporal Utility and Correlation Aversion

Steffen Andersen, Glenn W. Harrison, Morten Lau, E. Elisabet Rutström

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Convenient assumptions about qualitative properties of the intertemporal utility function have generated counterintuitive 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.
Convenient assumptions about qualitative properties of the intertemporal utility function have generated counterintuitive 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.
LanguageEnglish
JournalInternational Economic Review
Volume29
Issue number2
Pages537-555
Number of pages19
ISSN0020-6598
DOIs
StatePublished - May 2018

Cite this

Andersen, Steffen ; Harrison, Glenn W. ; Lau, Morten ; Rutström, E. Elisabet. / Multiattribute Utility Theory, Intertemporal Utility and Correlation Aversion. In: International Economic Review. 2018 ; Vol. 29, No. 2. pp. 537-555
@article{02d1fb7834f041f291bc4c0f8814f381,
title = "Multiattribute Utility Theory, Intertemporal Utility and Correlation Aversion",
abstract = "Convenient assumptions about qualitative properties of the intertemporal utility function have generated counterintuitive 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.",
author = "Steffen Andersen and Harrison, {Glenn W.} and Morten Lau and Rutstr{\"o}m, {E. Elisabet}",
year = "2018",
month = "5",
doi = "10.1111/iere.12279",
language = "English",
volume = "29",
pages = "537--555",
journal = "International Economic Review",
issn = "0020-6598",
publisher = "Wiley-Blackwell",
number = "2",

}

Multiattribute Utility Theory, Intertemporal Utility and Correlation Aversion. / Andersen, Steffen; Harrison, Glenn W.; Lau, Morten; Rutström, E. Elisabet.

In: International Economic Review, Vol. 29, No. 2, 05.2018, p. 537-555.

Research output: Contribution to journalJournal articleResearchpeer-review

TY - JOUR

T1 - Multiattribute Utility Theory, Intertemporal Utility and Correlation Aversion

AU - Andersen,Steffen

AU - Harrison,Glenn W.

AU - Lau,Morten

AU - Rutström,E. Elisabet

PY - 2018/5

Y1 - 2018/5

N2 - Convenient assumptions about qualitative properties of the intertemporal utility function have generated counterintuitive 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.

AB - Convenient assumptions about qualitative properties of the intertemporal utility function have generated counterintuitive 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.

U2 - 10.1111/iere.12279

DO - 10.1111/iere.12279

M3 - Journal article

VL - 29

SP - 537

EP - 555

JO - International Economic Review

T2 - International Economic Review

JF - International Economic Review

SN - 0020-6598

IS - 2

ER -