Advanced Search
MyIDEAS: Login to save this paper or follow this series

Eliciting Discount Functions when Baseline Consumption changes over Time


Author Info

  • Anke Gerber

    (Hamburg University)

  • Kirsten I.M. Rohde

    (Erasmus University Rotterdam)


Many empirical studies on intertemporal choice report preference reversals in the sensethat a preference between a small reward to be received soon and a larger reward to bereceived later reverses as both rewards are equally delayed. Such preference reversals arecommonly interpreted as contradicting constant discounting. This interpretation is correctonly if baseline consumption to which the outcomes are added, remains constant over time.The difficulty with measuring discounting when baseline consumption changes over time,is that delaying an outcome has two effects: (1) due to the change in baseline consumption,it changes the extra utility from receiving the outcome, and (2) it changes the factor bywhich this extra utility is discounted. In this paper we propose a way to disentangle thetwo effects, which allows us to draw conclusions about discounting even when baselineconsumption changes over time.

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:
Download Restriction: no

Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 09-103/1.

as in new window
Date of creation: 19 Nov 2009
Date of revision: 24 Feb 2010
Handle: RePEc:dgr:uvatin:20090103

Contact details of provider:
Web page:

Related research

Keywords: Hyperbolic discounting; Constant discounting; Preference reversals; Decreasing impatience;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:


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. Bleichrodt, Han & Rohde, Kirsten I.M. & Wakker, Peter P., 2009. "Non-hyperbolic time inconsistency," Games and Economic Behavior, Elsevier, vol. 66(1), pages 27-38, May.
  2. Jinkwon Lee, 2008. "The effect of the background risk in a simple chance improving decision model," Journal of Risk and Uncertainty, Springer, Springer, vol. 36(1), pages 19-41, February.
  3. Jawwad Noor, 2007. "Hyperbolic Discounting and the Standard Model," Boston University - Department of Economics - Working Papers Series, Boston University - Department of Economics WP2007-028, Boston University - Department of Economics.
  4. Donkers, A.C.D. & Melenberg, B. & Soest, A.H.O. van, 1999. "Estimating Risk Attitudes Using Lotteries; A Large Sample Approach," Discussion Paper, Tilburg University, Center for Economic Research 1999-12, Tilburg University, Center for Economic Research.
  5. Manel Baucells & Franz H. Heukamp, 2012. "Probability and Time Trade-Off," Management Science, INFORMS, INFORMS, vol. 58(4), pages 831-842, April.
  6. Gerber, Anke & Rohde, Kirsten I.M., 2010. "Risk and preference reversals in intertemporal choice," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 654-668, December.
Full references (including those not matched with items on IDEAS)



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


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:dgr:uvatin:20090103. 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: (Antoine Maartens (+31 626 - 160 892)).

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.