Answer to Question #132440 in Microeconomics for KESHAV singh

Question

Explain the relationship between the risk and inter temporal choice.

Answer 1

Inter temporal choice is simply a process by which individual’s current decision affects his/her available future option. For example, when you don’t consume onion today the level could increase in future significantly and vice versa holds true.

The relationship between the risk and inter temporal choice raised possibility that risk and time-delay are psychologically interchangeable on how they influence preferences. So we can say that risk has opposite effect on preference in inter-temporal choices. The two are correlated in monetary/ health domain. Considering time and probability, the two are also correlated but rather uncorrelated in terms monetary /health domain.