SUBJECTIVE EVALUATION OF DELAYED RISKY OUTCOMES: AN EXPERIMENTAL APPROACH

Uri Ben-Zion (), Jan Krahnen () and Tal Shavit ()
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Uri Ben-Zion: Dept. of Economics, Ben-Gurion University of the Negev, Israel

No 709, Working Papers from Ben-Gurion University of the Negev, Department of Economics

Abstract: This paper uses experimental data to estimate the pure time discount rate for different lengths of times for riskless assets (bonds), and risky assets (delayed lotteries). In moving from the present time (t = 0) to the future, there is a very sharp decline (jump) in the subjective price of the assets for both buy and sell transactions. This jump corresponds to a large increase in the discount rate for the first period and a much lower discount rate for later periods (forward rate). The findings cast doubt on the relevance of the hyperbolic function approach to discounting.

Keywords: Willingness to accept (WTA); Willingness to pay (WTP); Intertemporal choice, Decision-making. (search for similar items in EconPapers)
JEL-codes: C91 E43 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:0709

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