Inferring discount rates from time-preference experiments

Eric Duquette, Nathaniel Higgins and John Horowitz

Economics Letters, 2014, vol. 123, issue 2, 212-215

Abstract: We observe that identification of the discount rate from experimental data requires an assumption about the consumption period, the length of time over which a payment will be turned into utility-providing consumption. We show that the optimal consumption period is substantially longer than assumed in previous studies. When the consumption period is allowed to take on more reasonable values, the discount rates implied by experimental choices are unreasonably large and relatively insensitive to assumptions about utility curvature.

Keywords: Time preference; Discount rates; Experimental economics; Risk preference (search for similar items in EconPapers)
JEL-codes: C90 D01 D03 D81 D90 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:123:y:2014:i:2:p:212-215

DOI: 10.1016/j.econlet.2014.02.009

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