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HIV/AIDS, Risk Aversion and Intertemporal Choice

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Author Info

  • Judith Lammers

    (Tilburg University)

  • Sweder van Wijnbergen

    ()
    (University of Amsterdam)

Abstract

This study analyses the relation between perceived health status and intertemporal choice. We use data from experiments with real monetary rewards conduEted among students in South Africa to estimate risk and time preferences. These experimental data, based on muitiple price lists developed by Coller & Williams (1999), Holt & Laury (2002), and Harrison et al. (2002, 2005), show that HIV+ agents and participants that perceive to have a high HIV contraction risk are less risk-averse. Although the latter group displays higher discount rates, HP positive agents seem to have substantially lower discount rates, indicating longer time horizons in spite of their lowered life expectancy. However, we show that direct estimates of discount rates can be seriously biased estimators of the pure rate of time preference when other factors than just the pure rate of time preference are not considered simultaneously. We correct for differential mortality risk, risk aversion and differences in anticipated future marginal utility increases and price in these factors when calculating pure rates of time preference from observed discount rates. Once these factors are taken into account, HIV+ agents’ time preferences conform to expectations.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 07-098/1.

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Date of creation: 18 Dec 2007
Date of revision: 31 Jan 2008
Handle: RePEc:dgr:uvatin:20070098

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Web page: http://www.tinbergen.nl

Related research

Keywords: discount rate; risk aversion; perceived HIV infection risk; mortality; time preferences; marginal utility; hyperbolic discounting;

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References

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  1. Richard H. Thaler & Eric J. Johnson, 1990. "Gambling with the House Money and Trying to Break Even: The Effects of Prior Outcomes on Risky Choice," Management Science, INFORMS, INFORMS, vol. 36(6), pages 643-660, June.
  2. Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2001. "Estimating Individual Discount Rates in Denmark: A Field Experiment," NCEE Working Paper Series, National Center for Environmental Economics, U.S. Environmental Protection Agency 200102, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Nov 2001.
  3. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1644-1655, December.
  4. Maribeth Coller & Melonie Williams, 1999. "Eliciting Individual Discount Rates," Experimental Economics, Springer, Springer, vol. 2(2), pages 107-127, December.
  5. Anabela Botelho & Glenn W. Harrison & Lígia Pinto & Elisabet E. Rutstrom & Paula Veiga, 2005. "Discounting in developing countries: a pilot experiment in Timor-Leste," NIMA Working Papers, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho 31, Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho.
  6. Harrell Chesson & Jami Leichliter & Gregory Zimet & Susan Rosenthal & David Bernstein & Kenneth Fife, 2006. "Discount rates and risky sexual behaviors among teenagers and young adults," Journal of Risk and Uncertainty, Springer, Springer, vol. 32(3), pages 217-230, May.
  7. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 40(2), pages 351-401, June.
  8. Glenn W. Harrison & John A. List, 2004. "Field Experiments," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 42(4), pages 1009-1055, December.
  9. Olson, Mancur & Bailey, Martin J, 1981. "Positive Time Preference," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(1), pages 1-25, February.
  10. Robin Cubitt & Chris Starmer & Robert Sugden, 1998. "On the Validity of the Random Lottery Incentive System," Experimental Economics, Springer, Springer, vol. 1(2), pages 115-131, September.
  11. O'Donoghue, Ted & Rabin, Matthew, 2000. "Risky Behavior Among Youths: Some Issues from Behavioral Economics," Department of Economics, Working Paper Series, Department of Economics, Institute for Business and Economic Research, UC Berkeley qt5sf0z5rs, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  12. Starmer, Chris & Sugden, Robert, 1991. "Does the Random-Lottery Incentive System Elicit True Preferences? An Experimental Investigation," American Economic Review, American Economic Association, American Economic Association, vol. 81(4), pages 971-78, September.
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Cited by:
  1. Matthias Sutter & Martin G. Kocher & Daniela Glätzle-Rüetzler & Stefan T. Trautmann, 2013. "Impatience and Uncertainty: Experimental Decisions Predict Adolescents' Field Behavior," American Economic Review, American Economic Association, American Economic Association, vol. 103(1), pages 510-31, February.
  2. Lammers, J. & Kuilen, G. van de, 2007. "The HIV Anticaptory Saving Motive: An Empirical Analysis in South Africa," Discussion Paper, Tilburg University, Center for Economic Research 2007-51, Tilburg University, Center for Economic Research.

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