Title

Estimating Discount Factors For Public and Private Goods and Testing Competing Discounting Hypotheses

Document Type

Article

Language

eng

Format of Original

41 p.

Publication Date

4-2013

Publisher

Springer Verlag

Source Publication

Journal of Risk and Uncertainty

Source ISSN

0895-5646

Original Item ID

doi: 10.1007/s11166-013-9163-y

Abstract

The observation of declining discount rates in experimental settings has led many to promote hyperbolic discounting over standard exponential discounting as the preferred descriptive model of intertemporal choice. I develop a new framework, consistent with the random utility model, which directly models the intertemporal utility function and produces explicit maximum likelihood estimates of discounting parameters. I apply this estimation method to a stated-preference survey of river basin cleanup options and revealed-preference lottery payment choices. Formal statistical tests fail to find evidence in support of hyperbolic or quasi-hyperbolic discounting. Annual discount rates range from ten to fourteen percent across the data sets and empirical specifications.

Comments

Journal of Risk and Uncertainty, Vol. 46, No. 2 (April 2013): 133-173. DOI.