General probability-time tradeoff and intertemporal risk-value model

This article proposes an intertemporal risk-value (IRV) model that integrates probability-time tradeoff, time-value tradeoff, and risk-value tradeoff into one unified framework. We obtain a general probability-time tradeoff, which yields a formal representation form to reflect the psychological distance of a decisionmaker in evaluating a temporal lottery. This intuition of probability-time tradeoff is supported by robust empirical findings as well as by psychological theory. Through an explicit formalization of probability-time tradeoff, an IRV model taking into account three fundamental dimensions, namely, value, probability, and time, is established. The object of evaluation in our framework is a complex lottery. We also give some insights into the structure of the IRV model using a wildcatter problem.