Advanced Search
MyIDEAS: Login

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

Contents:

Author Info

  • Gautier, Pieter A
  • van Vuuren, Aico

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%.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.cepr.org/pubs/dps/DP8512.asp
Download Restriction: 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

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8512.

as in new window
Length:
Date of creation: Aug 2011
Date of revision:
Handle: RePEc:cpr:ceprdp:8512

Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information:
Email:

Related research

Keywords: discount rate; hedonic estimation; hyperbolic discounting; present bias;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. David Laibson & Andrea Repetto & Jeremy Tobacman, 2005. "Estimating Discount Functions with Consumption Choices over the Lifecycle," Levine's Bibliography 784828000000000643, UCLA Department of Economics.
  2. Paserman, Daniele, 2004. "Job Search and Hyperbolic Discounting: Structural Estimation and Policy Evaluation," IZA Discussion Papers 997, Institute for the Study of Labor (IZA).
  3. 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.
  4. Ariel Rubinstein, 2003. ""Economics and Psychology"? The Case of Hyperbolic Discounting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1207-1216, November.
  5. Hanming Fang & Yang Wang, 2010. "Estimating Dynamic Discrete Choice Models with Hyperbolic Discounting, with an Application to Mammography Decisions," PIER Working Paper Archive 10-033, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  6. Piet M.A. Eichholtz, 1997. "A Long Run House Price Index: The "Herengracht Index", 1628-1973," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 25(2), pages 175-192.
  7. Ahumada, Hildegart A. & Garegnani, Maria Lorena, 2007. "Testing hyperbolic discounting in consumer decisions: Evidence for Argentina," Economics Letters, Elsevier, vol. 95(1), pages 146-150, April.
  8. Hanming Fang & Dan Silverman, 2004. "Time-inconsistency and Welfare Program Participation: Evidence from the NLSY," Cowles Foundation Discussion Papers 1465, Cowles Foundation for Research in Economics, Yale University.
  9. Partha Dasgupta & Eric Maskin, 2004. "Uncertainty and Hyperbolic Discounting," Economics Working Papers 0023, Institute for Advanced Study, School of Social Science.
  10. Uri Benzion & Amnon Rapoport & Joseph Yagil, 1989. "Discount Rates Inferred from Decisions: An Experimental Study," Management Science, INFORMS, vol. 35(3), pages 270-284, March.
  11. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  12. Thaler, Richard, 1981. "Some empirical evidence on dynamic inconsistency," Economics Letters, Elsevier, vol. 8(3), pages 201-207.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8512. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.