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

Pieter Gautier and Aico van Vuuren

No 11-087/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: When agents have present bias, they discount more between now and thenext period than between period t (> 1) and t + 1. How fast the future discount rate (evaluated today) decays is an empirical question. Weshow that the discount function can be non-parametrically identified withcontracts that specify payments that take place at various points in timein the future and which are traded and priced in a competitive market.We use a unique land lease-contract data set for Amsterdam, which hasthe above properties, to test for present bias in a flexible way. We findno evidence for present bias in this market. Even though we allow for ageneral-hyperbolic specification (which has exponential discounting as aspecial case), our estimates converge to an exponential discount functionwith 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: 2011-06-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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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)
Working Paper: A Flexible Test for Present Bias and Time Preferences Using Land-Lease Contracts (2011)
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