Can Hypothetical Time Discounting Rates Predict Actual Behaviour: Evidence from a Randomized Experiment

Jacopo Bonan, Philippe LeMay-Boucher and Douglas Scott
Additional contact information
Philippe LeMay-Boucher: Heriot-Watt University
Douglas Scott: The University of Nottingham

No 2016.74, Working Papers from Fondazione Eni Enrico Mattei

Abstract: This paper estimates time preference parameters using commonly-applied methodologies, with the aim of investigating the link between these measures and actual economic behaviour. An experiment was conducted in the city of Thies, in Senegal, using the unique reference numbers of banknotes as a means of determining an individual’s willingness to save money. The findings of this experiment provide an innovative comparison between real choices, and choices made in the presence of hypothetical rewards. Our research indicates that individuals display a far greater degree of patience, when the possibility of genuine financial gain is made available to them. Our results show that hypothetical time preferences parameters are poor predictors of actual behaviour, prompting questions over the validity of commonly used measurements.

Keywords: Time Preferences; Randomized Experiment; Senegal (search for similar items in EconPapers)
JEL-codes: C93 D01 D91 O1 (search for similar items in EconPapers)
Date: 2016-12
New Economics Papers: this item is included in nep-exp and nep-upt
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Working Paper: Can Hypothetical Time Discounting Rates Predict Actual Behaviour: Evidence from a Randomized Experiment (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:fem:femwpa:2016.74

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