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Identifying present bias and time preferences with an application to land-lease-contract data1

Author

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  • Pieter A Gautier
  • Aico van Vuuren

Abstract

SummaryWhat can contracts—traded and priced in a competitive market and featuring a pre-specified system of future payments—teach us about time preferences and present bias? We first show that identification of present bias requires assumptions on the felicity function and that agents must have credit constraints on consumption expenditure. Moreover, when there is heterogeneity in present bias, identification requires that agents with the same present bias parameter buy houses with different contracts. We illustrate our findings with observational land-lease-contract data from Amsterdam.

Suggested Citation

  • Pieter A Gautier & Aico van Vuuren, 2020. "Identifying present bias and time preferences with an application to land-lease-contract data1," The Econometrics Journal, Royal Economic Society, vol. 23(3), pages 363-385.
    • Handle: RePEc:oup:emjrnl:v:23:y:2020:i:3:p:363-385.
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    File URL: http://hdl.handle.net/10.1093/ectj/utaa018
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    Cited by:

    1. van Vuuren, Aico, 2023. "Is there a diminishing willingness to pay for consumption amenities as a result of the Covid-19 pandemic?," Regional Science and Urban Economics, Elsevier, vol. 98(C).

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