A Flexible Test for Present Bias and Time Preferences using Land-Lease Contracts

Pieter Gautier and Aico van Vuuren

No 8512, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: When agents have present bias, they discount more between now and the next period than between period t (> 1) and t + 1. How fast the future discount rate (evaluated today) decays is an empirical question. We show that the discount function can be non-parametrically identified with contracts that specify payments that take place at various points in time in the future and which are traded and priced in a competitive market. We use a unique land lease-contract data set for Amsterdam, which has the above properties, to test for present bias in a flexible way. We find no evidence for present bias in this market. Even though we allow for a general-hyperbolic specification (which has exponential discounting as a special case), our estimates converge to an exponential discount function with a corresponding discount rate (in our baseline specification) of 8%.

Keywords: Present bias; Hyperbolic discounting; Discount rate; Hedonic estimation (search for similar items in EconPapers)
JEL-codes: C52 D03 D12 (search for similar items in EconPapers)
Date: 2011-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://cepr.org/publications/DP8512 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: A Flexible Test for Present Bias and Time Preferences Using Land-Lease Contracts (2011)
Working Paper: A Flexible Test for Present Bias and Time Preferences Using Land-Lease Contracts (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:8512

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP8512
orders@cepr.org

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by (repec@cepr.org).