Title

The Impacts of Elicitation Mechanism and Reward Size on Estimated Rates of Time Preference

Document Type

Article

Language

eng

Format of Original

17 p.

Publication Date

10-2015

Publisher

Elsevier

Source Publication

Journal of Behavioral and Experimental Economics

Source ISSN

2214-8043

Abstract

We run experiments with real monetary rewards ranging from $10 to $500 to estimate rates of time preference and test for hyperbolic discounting. Individuals become more patient with increasing reward sizes, which is consistent with a magnitude effect. This magnitude effect is robust across specifications including a nonparametric analysis and structural maximum likelihood estimation. Subjects are divided between two different elicitation mechanisms (one a matching task and one a choice task) that should both theoretically provide an incentive for participants to reveal their true time preferences. We find some evidence of differences between the rates from the matching and choice tasks but these differences disappear when appropriately modeling the behavioral noise. We uncover little to no evidence of present-biased time preferences.

Comments

Journal of Behavioral and Experimental Economics, Vol. 58 (October 2015): 132-148. DOI.