Intertemporal choice and nonadditive capitalization functions

✍ Scribed by Salvador Cruz Rambaud; Aldo G. S. Ventre

• Publisher: John Wiley and Sons
• Year: 2010
• Tongue: English
• Weight: 77 KB
• Volume: 26
• Category: Article
• ISSN: 0884-8173
• DOI: 10.1002/int.20453

✦ Synopsis

Many papers on finance are interested in studying the preferences of a certain group of individuals about the choice of several rewards available at different time instants. Usually these works are conducted from an experimental point of view by means of samples to be passed to a control group. One of the most important issues in this research is nonadditivity when describing the behavior in experimental intertemporal choice. For instance, subadditivity in behavioral finance means that a certain subject prefers to divide the duration of an investment as many times as possible because this choice leads to an increase in profitability. Another context is medical research on impulsivity and loss of self-control in drug-dependent patients because there is a relationship between impulsive decision-making in intertemporal choice and estimation of time duration. Here subadditivity appears when administering some drugs in a group of substance abusers because they can feel a slight improvement when the same dose is divided into several parts. The problem arising here is how to measure the degree of subadditivity or superadditivity perceived by a group of individuals who are not experts in finance or medicine, respectively. So, our research will be addressed from a nonlinearity of time-perception perspective.