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Eliciting Individual-Specific Discount Rates

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Author Info
Trudy Ann Cameron () (Department of Economics, University of Oregon)
Geoffrey R. Gerdes () (Federal Reserve Board of Governors)

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Abstract

Longstanding debate over the appropriate social discount rate for public projects stems from our lack of knowledge about how individual discount rates vary across people and across choice contexts. Using a sample of roughly 15,000 choices by over 2000 individuals, we estimate utility theoretic models concerning private tradeoffs involving money over time that reveal individual specific discount rates. We control for experimentally differentiated choice scenarios, sociodemographic heterogeneity, and elicitation formats, and complex forms of heteroscedasticity. Statistically significant heterogeneity in discount rates is quantified for both an exponential discounting model and a competing hyperbolic model, but neither specification clearly dominates.

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File URL: http://economics.uoregon.edu/papers/UO-2003-10_Cameron_Gerdes_discount.pdf
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Publisher Info
Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number 2003-10.

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Length: 49
Date of creation: 01 Jan 2003
Date of revision: 01 Jan 2003
Handle: RePEc:ore:uoecwp:2003-10

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Find related papers by JEL classification:
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
H4 - Public Economics - - Publicly Provided Goods
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models

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  1. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring. [Downloadable!] (restricted)
  2. Kirby, Kris N. & Marakovic, Nino N., 1995. "Modeling Myopic Decisions: Evidence for Hyperbolic Delay-Discounting within Subjects and Amounts," Organizational Behavior and Human Decision Processes, Elsevier, vol. 64(1), pages 22-30, October. [Downloadable!] (restricted)
  3. DeShazo, J. R. & Fermo, German, 2002. "Designing Choice Sets for Stated Preference Methods: The Effects of Complexity on Choice Consistency," Journal of Environmental Economics and Management, Elsevier, vol. 44(1), pages 123-143, July. [Downloadable!] (restricted)
  4. Lawrance, Emily C, 1991. "Poverty and the Rate of Time Preference: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 54-77, February. [Downloadable!] (restricted)
  5. Keller, L Robin & Strazzera, Elisabetta, 2002. " Examining Predictive Accuracy Among Discounting Models," Journal of Risk and Uncertainty, Springer, vol. 24(2), pages 143-60, March. [Downloadable!] (restricted)
  6. Johannesson, Magnus & Johansson, Per-Olov, 1997. "The Value of Life Extension and the Marginal Rate of Time Preference: A Pilot Study," Applied Economics Letters, Taylor and Francis Journals, vol. 4(1), pages 53-55, January. [Downloadable!] (restricted)
  7. 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.
  8. Arrow, Kenneth J. & Cropper, Maureen L. & Eads, George C. & Hahn, Robert W. & Lave, Lester B. & Noll, Roger G. & Portney, Paul R. & Russell, Milson & Schmalensee, Richard & Smith, V. Kerry & Stavins, , 2001. "Is there a role for benefit-cost analysis in environmental, health, and safety regulation?," Environment and Development Economics, Cambridge University Press, vol. 2(02), pages 195-221, March. [Downloadable!]
  9. John A. Cairns & Marjon M. Van Der Pol, 1997. "Saving future lives. A comparison of three discounting models," Health Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 341-350.
  10. Dermot Gately, 1980. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables: Comment," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 373-374, Spring. [Downloadable!] (restricted)
  11. Lind, Robert C., 1990. "Reassessing the government's discount rate policy in light of new theory and data in a world economy with a high degree of capital mobility," Journal of Environmental Economics and Management, Elsevier, vol. 18(2), pages S8-S28, March. [Downloadable!] (restricted)
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