Characterization of variation averse preferences by present value

Abstract

This paper uses Gilboa's (1989) variation aversion model to examine additive separability in intertemporal decision models. We present a characterization of this model using present values and based on this characterization, we argue that additive separability may not necessarily be rational in some settings. Our method also has the advantage that it allows for testing models by using econometric techniques. (c) 2020 Elsevier B.V. All rights reserved.