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Estimating Individual Discount Rates in Denmark: A Field Experiment

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  • Harrison, Glenn W.
  • Lau, Morten I.
  • Williamss, Melonie B.

Abstract

We estimate individual discount rates with respect to time streams of money using controlled laboratory experiments. These discount rates are elicited by means of field experiments involving real monetary rewards. The experiments were carried out across Denmark using a representative sample of 268 people between 19 and 75 years of age. Individual discount rates are estimated for various households differentiated by socio-demographic characteristics such as income and age. Our conclusions are that discount rates are constant over the 6month to 3-year horizons used in these experiments, that discount rates vary with respect to several socio-demographic variables, and that they decline with age after middle age. Hence we conclude that it would be reasonable to assume constant discount rates for specific household types, but not the same rates across all households.

Suggested Citation

  • Harrison, Glenn W. & Lau, Morten I. & Williamss, Melonie B., 2001. "Estimating Individual Discount Rates in Denmark: A Field Experiment," National Center for Environmental Economics-NCEE Working Papers 280791, United States Environmental Protection Agency (EPA).
    • Handle: RePEc:ags:nceewp:280791
    DOI: 10.22004/ag.econ.280791
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    References listed on IDEAS

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    4. James H. Holcomb & Paul S. Nelson, 1992. "Another Experimental Look at Individual Time Preference," Rationality and Society, , vol. 4(2), pages 199-220, April.
    5. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
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