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Measuring preferences over the temporal resolution of consumption uncertainty

Thomas Meissner and Philipp Pfeiffer

Journal of Economic Theory, 2022, vol. 200, issue C

Abstract: Timing premia measure how much consumption people are willing to forgo to resolve all consumption uncertainty immediately. We develop a novel experiment to elicit these attitudes directly in a model-free way. On average, subjects forgo around 5% of their total consumption to resolve all uncertainty immediately. Recursive utility models postulate a structural link between timing premia and deep preference parameters. We elicit these preference parameters separately and estimate corresponding predicted timing premia. Comparing directly elicited and predicted timing premia allows us to test this structural link. Surprisingly, we find a negative correlation between predicted and elicited timing premia.

Keywords: Recursive utility; Timing of resolution of uncertainty; Preference elicitation; Timing premia; Risk and time preferences (search for similar items in EconPapers)
JEL-codes: C91 E24 E44 G12 O40 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:200:y:2022:i:c:s0022053121001964

DOI: 10.1016/j.jet.2021.105379

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