This paper introduces the random discounted expected utility (RDEU) model, which we have developed as a means to deal with heterogeneous risk and time preferences. The RDEU model provides an explicit linkage between preference and choice heterogeneity. We prove that it has solid comparative statics and also demonstrate its computational convenience. Finally, we illustrate the empirical implementation of this model using two distinct experimental datasets.
Previously circulated as “Random Models for the Joint Treatment of Risk and Time Preferences”.