Estimating Time Preferences from Convex Budgets / James Andreoni, Charles Sprenger.

Format:

Book

Author/Creator:

Andreoni, James.

Contributor:

National Bureau of Economic Research.

Sprenger, Charles.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16347.

NBER working paper series no. w16347

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

Experimentally elicited discount rates are frequently higher than what one would infer from market interest rates and seem unreasonable for economic decision-making. Such high rates have often been attributed to present bias and hyperbolic discounting. A commonly recognized bias of standard elicitation techniques is the use of linear preferences for identification. When attempts are made to correct this bias with additional experimental measures, researchers find exceptional degrees of utility function curvature. We present a new methodology for identifying time preferences, both discounting and utility function curvature, from simple allocation decisions. We estimate annual discount rates substantially lower than normally obtained, dynamically consistent discounting, and limited though significant utility function curvature.

Notes:

Print version record

September 2010.