Hyperbolic Discounting of Public Goods

W Kip Viscusi and Joel Huber

No 11935, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This article examines revealed rates of time preference for public goods, using environmental quality as the case study. A nationally representative panel-based sample of 2,914 respondents considered a series of 5 conjoint policy choices, yielding 14,570 decisions. Both the conditional fixed effect logit estimates of the random utility model and mixed logit estimates implied that the rate of time preference is very high for immediate improvements and drops off substantially thereafter, which is inconsistent with exponential discounting but consistent with hyperbolic discounting. The implied marginal rate of time preference declines and then rises. Estimates of the quasi-hyperbolic discounting parameter range from 0.48 to 0.61. People who are older are especially likely to have a high disutility from delays in improving water quality.

JEL-codes: Q20 D90 H40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dcm, nep-pbe and nep-pub
Date: 2006-01
Note: HC LE PE EEE

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