Higher-Order Risk Preferences over Wealth and Time: Theory and Behavioral Consistency

Authors

• Hannah H. Chen, National Central University
• Cary Deck, Chapman UniversityFollow
• Rachel J. Huang, National Central University
• Larry Y. Tzeng, National Taiwan University
• Lin Zhao, Southwestern University of Finance and Economics

Document Type

Article

Publication Date

10-2026

Abstract

Economic decisions often involve uncertainty in both wealth and time. We introduce an axiom requiring the trade-of between wealth and time to remain invariant across both domains. Together with standard axioms, it characterizes Expected Additive Time-Wealth Utility (EATWU). We provide an alternative characterization based on consistency in higher-order risk preferences and extend risk apportionment to decisions involving wealth, time, and both. Our model predicts consistent risk allocations across these domains within each order. A laboratory experiment examining second-, third-, and fourth-order risk preferences fnds systematic relationships across domains that are broadly consistent with the model’s predictions.

Comments

ESI Working Paper 26-13

Recommended Citation

Chen, H. H., Deck, C., Huang, R. J., Tzeng, L. Y., & Zhao, L. (2026). Higher-order risk preferences over wealth and time: Theory and behavioral consistency. ESI Working Paper 26-13. https://digitalcommons.chapman.edu/esi_working_papers/444/