Discounting Behavior and the Magnitude Effect
AbstractWe evaluate the claim that individuals exhibit a magnitude effect in their discounting behavior, which is said to occur when higher discount rates are inferred from choices made with lower principals, all else being equal. If the effect is robust, as claimed, we should be able to see it using procedures that are more familiar to economists. Using data collected from a representative sample of adult Danes, we find statistically significant evidence of a small magnitude effect, at levels that are much smaller than is typically claimed. This evidence only surfaces if one carefully controls for unobserved individual heterogeneity in the population. And it disappears completely if we include discounting choices in which both options have some time delay.
Download InfoIf 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.
Bibliographic InfoPaper provided by Durham University Business School in its series Working Papers with number 2011_02.
Date of creation: 01 May 2011
Date of revision:
Contact details of provider:
Postal: Durham University Business School, Mill Hill Lane, Durham DH1 3LB, England
Phone: +44 (0)191 334 5200
Fax: +44 (0)191 334 5201
Web page: http://www.dur.ac.uk/business
More information through EDIRC
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-22 (All new papers)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ubfal, Diego, 2012.
"How General Are Time Preferences? Eliciting Good-Specific Discount Rates,"
IZA Discussion Papers
6774, Institute for the Study of Labor (IZA).
- Diego Ubfal, 2013. "How General Are Time Preferences? Eliciting Good-Specific Discount Rates," Working Papers 473, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Drichoutis, Andreas & Nayga, Rodolfo, 2012. "Do risk and time preferences have biological roots?," MPRA Paper 37320, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (IT Office).
If references are entirely missing, you can add them using this form.