timeriskbeliefs: Beliefs, Time, and Risk Preferences

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This research proposal studies how people make decisions. The main focus is on the connections between individuals' expectations, risk aversion, and intertemporal substitution. Understanding these connections will shed light on several economic phenomena and clarify the restrictions and limitations of existing economic models.This research agenda will be developed in two lines of work. The first line will investigate how an individual's beliefs shape which choices the individual makes. We will study how different informational environments generate "psychological search frictions" and how these frictions differ from "real" search costs, traditionally studied by economists. Unlike search costs, psychological frictions depend on the information being collected and the payoffs involved. Psychological frictions provide an explanation for the empirical observation that individuals often fail to search for better options in high-stakes settings. We will also use this theory to study how the informational environment shapes people's willingness to start new businesses, take financial risks, and buy insurance.The second line of work will study how time and risk preferences relate to Stochastic Impatience, a behavioural property that generalises impatience to risky environments. We will study the restrictions that Stochastic Impatience imposes and test its validity with experiments. Our aim is to provide guidance on models and parameters used to fit Macroeconomic and Finance data and to open a new avenue for identification and testing.