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The prevalence of hyperbolic discounting: some European evidence

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Author Info
Joseph G. Eisenhauer
Luigi Ventura

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Abstract

Experimental matching data are used from the 2000 Bank of Italy Survey of Household Income and Wealth (SHIW) and the 2000 wave of the Center for Economic Research (CentER) Savings Survey at Tilburg University to compare the relative frequencies of hyperbolic and exponential discounters. Among 3200 Italian respondents and 1400 Dutch respondents, less than a quarter exhibited hyperbolic discounting. This finding is both statistically significant and robust with respect to various assumptions regarding utility; moreover, it holds across a wide variety of economic, social and demographic characteristics. The youngest, poorest, most urban and least educated individuals are the most likely to be hyperbolic discounters. In addition, it is found that hyperbolic discounters accumulate less wealth and are somewhat less likely than exponential discounters to utilize commitment devices to constrain their future choices.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Economics.

Volume (Year): 38 (2006)
Issue (Month): 11 (June)
Pages: 1223-1234
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Handle: RePEc:taf:applec:v:38:y:2006:i:11:p:1223-1234

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  1. Johannesson, Magnus & Liljas, Bengt & O'Conor, Richard M, 1997. "Hypothetical versus Real Willingness to Pay: Some Experimental Results," Applied Economics Letters, Taylor and Francis Journals, vol. 4(3), pages 149-51, March. [Downloadable!] (restricted)
  2. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  3. Miles S. Kimball, 1990. "Precautionary Saving and the Marginal Propensity to Consume," NBER Working Papers 3403, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  5. Lowenstein, George & Prelec, Drazen, 1991. "Negative Time Preference," American Economic Review, American Economic Association, vol. 81(2), pages 347-52, May.
  6. Deaton, A. & Grosh, M., 1998. "Consumption," Papers 191, Princeton, Woodrow Wilson School - Development Studies.
  7. George-Marios Angeletos et al., 2001. "The Hyberbolic Consumption Model: Calibration, Simulation, and Empirical Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 47-68, Summer. [Downloadable!] (restricted)
  8. Uri Benzion & Yochanan Shachmurove & Joseph Yagil, 2004. "Subjective discount functions - an experimental approach," Applied Financial Economics, Taylor and Francis Journals, vol. 14(5), pages 299-311, March. [Downloadable!] (restricted)
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