IDEAS home Printed from https://ideas.repec.org/a/eee/soceco/v58y2015icp132-148.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2214804315000981
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.socec.2015.08.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Noussair, Charles & Robin, Stephane & Ruffieux, Bernard, 2004. "Revealing consumers' willingness-to-pay: A comparison of the BDM mechanism and the Vickrey auction," Journal of Economic Psychology, Elsevier, vol. 25(6), pages 725-741, December.
    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.
    3. Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," American Economic Review, American Economic Association, vol. 84(1), pages 255-270, March.
    4. Andrew Meyer, 2013. "Estimating discount factors for public and private goods and testing competing discounting hypotheses," Journal of Risk and Uncertainty, Springer, vol. 46(2), pages 133-173, April.
    5. Martin Ahlbrecht & Martin Weber, 1997. "An Empirical Study on Intertemporal Decision Making Under Risk," Management Science, INFORMS, vol. 43(6), pages 813-826, June.
    6. Anujit Chakraborty & Evan M. Calford & Guidon Fenig & Yoram Halevy, 2017. "External and internal consistency of choices made in convex time budgets," Experimental Economics, Springer;Economic Science Association, vol. 20(3), pages 687-706, September.
    7. Andersen, Steffen & Harrison, Glenn W. & Lau, Morten I. & Rutström, E. Elisabet, 2014. "Discounting behavior: A reconsideration," European Economic Review, Elsevier, vol. 71(C), pages 15-33.
    8. Charles M. Harvey, 1986. "Value Functions for Infinite-Period Planning," Management Science, INFORMS, vol. 32(9), pages 1123-1139, September.
    9. Lorenzo Cappellari & Stephen P. Jenkins, 2006. "Calculation of multivariate normal probabilities by simulation, with applications to maximum simulated likelihood estimation," Stata Journal, StataCorp LP, vol. 6(2), pages 156-189, June.
    10. Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment," American Economic Review, American Economic Association, vol. 92(5), pages 1606-1617, December.
    11. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Eliciting Risk and Time Preferences," Econometrica, Econometric Society, vol. 76(3), pages 583-618, May.
    12. Lee Cronbach, 1951. "Coefficient alpha and the internal structure of tests," Psychometrika, Springer;The Psychometric Society, vol. 16(3), pages 297-334, September.
    13. James Andreoni & Charles Sprenger, 2012. "Risk Preferences Are Not Time Preferences," American Economic Review, American Economic Association, vol. 102(7), pages 3357-3376, December.
    14. Yoram Halevy, 2015. "Time Consistency: Stationarity and Time Invariance," Econometrica, Econometric Society, vol. 83, pages 335-352, January.
    15. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1990. "Experimental Tests of the Endowment Effect and the Coase Theorem," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1325-1348, December.
    16. Yoram Halevy, 2008. "Strotz Meets Allais: Diminishing Impatience and the Certainty Effect," American Economic Review, American Economic Association, vol. 98(3), pages 1145-1162, June.
    17. Steffen Andersen & Glenn Harrison & Arne Hole & Morten Lau & E. Rutström, 2012. "Non-linear mixed logit," Theory and Decision, Springer, vol. 73(1), pages 77-96, July.
    18. John D. Hey & Chris Orme, 2018. "Investigating Generalizations Of Expected Utility Theory Using Experimental Data," World Scientific Book Chapters, in: Experiments in Economics Decision Making and Markets, chapter 3, pages 63-98, World Scientific Publishing Co. Pte. Ltd..
    19. James Andreoni & Charles Sprenger, 2012. "Estimating Time Preferences from Convex Budgets," American Economic Review, American Economic Association, vol. 102(7), pages 3333-3356, December.
    20. 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.
    21. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    22. Jacinto Braga & Chris Starmer, 2005. "Preference Anomalies, Preference Elicitation and the Discovered Preference Hypothesis," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 32(1), pages 55-89, September.
    23. Slonim, Robert & Carlson, James & Bettinger, Eric, 2007. "Possession and discounting behavior," Economics Letters, Elsevier, vol. 97(3), pages 215-221, December.
    24. Shogren, Jason F. & Cho, Sungwon & Koo, Cannon & List, John & Park, Changwon & Polo, Pablo & Wilhelmi, Robert, 2001. "Auction mechanisms and the measurement of WTP and WTA," Resource and Energy Economics, Elsevier, vol. 23(2), pages 97-109, April.
    25. Keller, L Robin & Strazzera, Elisabetta, 2002. "Examining Predictive Accuracy Among Discounting Models," Journal of Risk and Uncertainty, Springer, vol. 24(2), pages 143-160, March.
    26. Maribeth Coller & Melonie Williams, 1999. "Eliciting Individual Discount Rates," Experimental Economics, Springer;Economic Science Association, vol. 2(2), pages 107-127, December.
    27. Benhabib, Jess & Bisin, Alberto & Schotter, Andrew, 2010. "Present-bias, quasi-hyperbolic discounting, and fixed costs," Games and Economic Behavior, Elsevier, vol. 69(2), pages 205-223, July.
    28. Cairns, John & van der Pol, Marjon, 2000. "Valuing future private and social benefits: The discounted utility model versus hyperbolic discounting models," Journal of Economic Psychology, Elsevier, vol. 21(2), pages 191-205, April.
    29. Read, Daniel & Roelofsma, Peter H. M. P., 2003. "Subadditive versus hyperbolic discounting: A comparison of choice and matching," Organizational Behavior and Human Decision Processes, Elsevier, vol. 91(2), pages 140-153, July.
    30. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
    31. Paola Manzini & Marco Mariotti & Luigi Mittone, 2008. "The elicitation of time preferences," CEEL Working Papers 0806, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    32. Paul A. Samuelson, 1937. "A Note on Measurement of Utility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 4(2), pages 155-161.
    33. E. S. Phelps & R. A. Pollak, 1968. "On Second-Best National Saving and Game-Equilibrium Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 35(2), pages 185-199.
    34. Timothy N. Cason & Charles R. Plott, 2014. "Misconceptions and Game Form Recognition: Challenges to Theories of Revealed Preference and Framing," Journal of Political Economy, University of Chicago Press, vol. 122(6), pages 1235-1270.
    35. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2013. "Discounting Behaviour and the Magnitude Effect: Evidence from a Field Experiment in Denmark," Economica, London School of Economics and Political Science, vol. 80(320), pages 670-697, October.
    36. repec:cup:judgdm:v:8:y:2013:i:3:p:236-249 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jindrich Matousek & Tomas Havranek & Zuzana Irsova, 2022. "Individual discount rates: a meta-analysis of experimental evidence," Experimental Economics, Springer;Economic Science Association, vol. 25(1), pages 318-358, February.
    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.
    3. Cruz Rambaud, Salvador & Ortiz Fernández, Piedad & Parra Oller, Isabel María, 2023. "A systematic review of the main anomalies in intertemporal choice," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 104(C).
    4. Sergio Da Silva & Dinorá De Faveri & Ana Correa & Raul Matsushita, 2017. "High-income consumers may be less hyperbolic when discounting the future," Economics Bulletin, AccessEcon, vol. 37(3), pages 1421-1434.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Andersen, Steffen & Harrison, Glenn W. & Lau, Morten I. & Rutström, E. Elisabet, 2014. "Discounting behavior: A reconsideration," European Economic Review, Elsevier, vol. 71(C), pages 15-33.
    2. Jindrich Matousek & Tomas Havranek & Zuzana Irsova, 2022. "Individual discount rates: a meta-analysis of experimental evidence," Experimental Economics, Springer;Economic Science Association, vol. 25(1), pages 318-358, February.
    3. Andrew Meyer, 2013. "Estimating discount factors for public and private goods and testing competing discounting hypotheses," Journal of Risk and Uncertainty, Springer, vol. 46(2), pages 133-173, April.
    4. Uttara Balakrishnan & Johannes Haushofer & Pamela Jakiela, 2020. "How soon is now? Evidence of present bias from convex time budget experiments," Experimental Economics, Springer;Economic Science Association, vol. 23(2), pages 294-321, June.
    5. Robin Chark & Soo Chew & Songfa Zhong, 2015. "Extended present bias: a direct experimental test," Theory and Decision, Springer, vol. 79(1), pages 151-165, July.
    6. Stephen L. Cheung, 2020. "Eliciting utility curvature in time preference," Experimental Economics, Springer;Economic Science Association, vol. 23(2), pages 493-525, June.
    7. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2013. "Discounting Behaviour and the Magnitude Effect: Evidence from a Field Experiment in Denmark," Economica, London School of Economics and Political Science, vol. 80(320), pages 670-697, October.
    8. Galizzi, Matteo M. & Miraldo, Marisa & Stavropoulou, Charitini & van der Pol, Marjon, 2016. "Doctor–patient differences in risk and time preferences: A field experiment," Journal of Health Economics, Elsevier, vol. 50(C), pages 171-182.
    9. Laurent Denant-Boemont & Enrico Diecidue & Olivier l’Haridon, 2017. "Patience and time consistency in collective decisions," Experimental Economics, Springer;Economic Science Association, vol. 20(1), pages 181-208, March.
    10. Stein T. Holden & Dag Einar Sommervoll & Mesfin Tilahun, 2022. "Mental Zooming as Variable Asset Integration in Inter-Temporal Choice," International Journal of Applied Behavioral Economics (IJABE), IGI Global, vol. 11(1), pages 1-21, January.
    11. Rodriguez-Lara, Ismael & Ponti, Giovanni, 2017. "Social motives vs social influence: An experiment on interdependent time preferences," Games and Economic Behavior, Elsevier, vol. 105(C), pages 177-194.
    12. Drouhin, Nicolas, 2020. "Non-stationary additive utility and time consistency," Journal of Mathematical Economics, Elsevier, vol. 86(C), pages 1-14.
    13. Ubfal, Diego, 2016. "How general are time preferences? Eliciting good-specific discount rates," Journal of Development Economics, Elsevier, vol. 118(C), pages 150-170.
    14. Abdellaoui, Mohammed & Kemel, Emmanuel & Panin, Amma & Vieider, Ferdinand M., 2019. "Measuring time and risk preferences in an integrated framework," Games and Economic Behavior, Elsevier, vol. 115(C), pages 459-469.
    15. Sebastian Schweighofer-Kodritsch, 2015. "Time Preferences and Bargaining," STICERD - Theoretical Economics Paper Series /2015/568, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    16. Chiara Pastore & Stefanie Schurer & Agnieszka Tymula & Nicholas Fuller & Ian Caterson, 2023. "Economic preferences and obesity: Evidence from a clinical lab‐in‐field study," Health Economics, John Wiley & Sons, Ltd., vol. 32(9), pages 2147-2167, September.
    17. 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.
    18. Kumar, Pradeep & Kant, Shashi, 2019. "Endogenous time preferences of forest goods and community-based forest management," Ecological Economics, Elsevier, vol. 163(C), pages 205-214.
    19. OUATTARA, Aboudou & DE LA BRUSLERIE, Hubert, 2015. "The term structure of psychological discount rate: characteristics and functional forms," MPRA Paper 75111, University Library of Munich, Germany.
    20. Belzil, Christian & Sidibé, Modibo, 2016. "Internal and External Validity of Experimental Risk and Time Preferences," IZA Discussion Papers 10348, Institute of Labor Economics (IZA).

    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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:soceco:v:58:y:2015:i:c:p:132-148. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620175 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.