Estimating discount factors for public and private goods and testing competing discounting hypotheses

Andrew Meyer

Journal of Risk and Uncertainty, 2013, vol. 46, issue 2, 133-173

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. Copyright Springer Science+Business Media New York 2013

Keywords: Discounting; Hyperbolic; Random utility; Intertemporal choice; D90; Q25; Q53; H43 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (18)

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DOI: 10.1007/s11166-013-9163-y

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