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February 24, 2026Journal of Risk and Uncertainty0 citationsOpen Access

The Magnitude Paradox in Risk and Time Discounting Models

The magnitude paradox

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Authors

ABAdrian BruhinHFHelga Fehr-DudaSHSean Hofland

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Overview

Experiments reveal that risk aversion increases while impatience decreases with outcome magnitude, suggesting a new model of decision-making.

Key Points

  • To understand the relationship between risk taking and time discounting in the context of magnitude effects.
  • Developed a two-speeds model linking risk aversion and impatience.
  • Conducted a high-stakes laboratory experiment to test the magnitude paradox.
  • Estimated competing models using Bayesian Information Criterion and Akaike Information Criterion.
  • Demonstrated that relative risk aversion increases with outcome magnitude.
  • Showed decreasing impatience with increasing outcome magnitude.
  • Supported the two-speeds model which predicts magnitude-dependent discount weights.

Cite This Study

Bruhin et al. (2026) studied this question.

synapsesocial.com/papers/699d3fd9de8e28729cf64a77https://doi.org/10.1007/s11166-026-09479-9
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