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Time Delay and Investment Decisions: Evidence from An Experiment in Tanzania

Author

Listed:
  • Plamen Nikolov

    () (State University of New York (at Binghamton); Harvard Institute for Quantitative Social Science)

Abstract

Attitudes toward risk underlie virtually every important economic decision an individual makes. In this experimental study, I examine how introducing a time delay into the execution of an investment plan influences individuals' risk preferences. The field experiment proceeded in three stages: a decision stage, an execution stage and a payout stage. At the outset, in the Decision Stage (Stage 1), each subject was asked to make an investment plan by splitting a monetary investment amount between a risky asset and a safe asset. Subjects were informed that the investment plans they made in the Decision Stage are binding and will be executed during the Execution Stage (Stage 2). The Payout Stage (Stage 3) was the payout date. The timing of the Decision Stage and Payout Stage was the same for each subject, but the timing of the Execution Stage varied experimentally. I find that individuals who were assigned to execute their investment plans later (i.e., for whom there was a greater delay prior to the Execution Stage) invested a greater amount in the risky asset during the Decision Stage.

Suggested Citation

  • Plamen Nikolov, 2018. "Time Delay and Investment Decisions: Evidence from An Experiment in Tanzania," Economics Bulletin, AccessEcon, vol. 38(2), pages 1124-1137.
  • Handle: RePEc:ebl:ecbull:eb-17-00225
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Nikolov, Plamen & Adelman, Alan, 2019. "Do Private Household Transfers to the Elderly Respond to Public Pension Benefits? Evidence from Rural China," GLO Discussion Paper Series 357, Global Labor Organization (GLO).
    2. Nikolov, Plamen & Adelman, Alan, 2019. "Do Private Household Transfers to the Elderly Respond to Public Pension Benefits? Evidence from Rural China," IZA Discussion Papers 12532, Institute of Labor Economics (IZA).
    3. Nusrat Abedin Jimi & Plamen Nikolov & Mohammad Abdul Malek & Subal Kumbhakar, 2019. "The Effects of Access to Credit on Productivity: Separating Technological Changes from Changes in Technical Efficiency," Working Papers 2019-052, Human Capital and Economic Opportunity Working Group.
    4. Jimi, Nusrat Abedin & Nikolov, Plamen & Malek, Mohammad Abdul & Kumbhakar, Subal C., 2019. "The Effects of Access to Credit on Productivity: Separating Technological Changes from Changes in Technical Efficiency," IZA Discussion Papers 12514, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    risk and time; investments; reference-point models; field experiment;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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