Nonexpected utility preferences in a temporal framework with an application to consumption-savings behaviour

Abstract

This paper investigates the role of non-expected utility preferences in a multiperiod consumption/savings framework. Three objectives are achieved: First, it is shown that behaviour can be intertemporally consistent even if the preference ordering is not. Second, non-expected utility preference orderings are shown to be useful for disentangling the elasticity of intertemporal substitution from the degree of risk aversion. Finally, some discrimination between the non-expected utility theories that have appeared in the atemporal literature is achieved by means of axioms which arise naturally from the multiperiod framework.