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The impacts of elicitation mechanism and reward size on estimated rates of time preference

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  • Meyer, Andrew G.

Abstract

We run experiments with real monetary rewards ranging from $10 to $500 to estimate rates of time preference and test for hyperbolic discounting. Individuals become more patient with increasing reward sizes, which is consistent with a magnitude effect. This magnitude effect is robust across specifications including a nonparametric analysis and structural maximum likelihood estimation. Subjects are divided between two different elicitation mechanisms (one a matching task and one a choice task) that should both theoretically provide an incentive for participants to reveal their true time preferences. We find some evidence of differences between the rates from the matching and choice tasks but these differences disappear when appropriately modeling the behavioral noise. We uncover little to no evidence of present-biased time preferences.

Suggested Citation

  • Meyer, Andrew G., 2015. "The impacts of elicitation mechanism and reward size on estimated rates of time preference," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 58(C), pages 132-148.
  • Handle: RePEc:eee:soceco:v:58:y:2015:i:c:p:132-148
    DOI: 10.1016/j.socec.2015.08.002
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    Cited by:

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    2. Andrew G. Meyer, 2016. "Explaining the fixed cost component of discounting: the importance of students' liquidity constraints," Economics Bulletin, AccessEcon, vol. 36(1), pages 355-364.

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    More about this item

    Keywords

    Discounting; Intertemporal choice; Experiments; Magnitude effect;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles

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