Exploring the Concept of Utility: Are Separate Value Functions required for Risky and Inter-temporal Choice?

Utility based models are common in both the risky and intertemporal choice literatures. Recently there have been efforts to formulate models of choices which involve both risks and time delays. An important question then is whether the concept of utility is the same for risky and inter-temporal choices. We address this question by fitting versions of two popular utility based models, Cumulative Prospect Theory for risky choice, and Hyperbolic Discounting for inter-temporal choice, to data from three experiments which involved both choice types. The models were fit assuming either the same concept of utility for both, by way of a common value function, or different utilities with separate value functions. Our results show that while many participants seem to require the flexibility of different value functions, an approximately equal number do not suggesting they may have a single concept of utility. Furthermore for both choice types value functions were concave.