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Estimating Discount Rates Using Referendum-style Choice Experiments: An Analysis of Multiple Methods

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  • Gregory Howard
  • John C. Whitehead
  • Jacob Hochard

Abstract

There is a growing literature that utilizes stated preference surveys to estimate discount rates. A review of the literature reveals large variation both in the discount rate estimates coming from different stated preference surveys and in the specific methodologies used to estimate discount rates. While most methods use similar theory and logic in deriving discount rate estimates, it is an open question how much of the variation seen in the literature is due to differences in methodology. Using a single data set, we estimate annual discount rates using six different methodologies and find that most of our estimates are tightly clustered between 25 31%. One methodology yields an outlier value of 200%. We also use multiple metrics to examine which methodology yields the “right” discount rate. Key Words: Discount rate; mixed logit; discrete choice experiment

Suggested Citation

  • Gregory Howard & John C. Whitehead & Jacob Hochard, 2020. "Estimating Discount Rates Using Referendum-style Choice Experiments: An Analysis of Multiple Methods," Working Papers 20-01, Department of Economics, Appalachian State University.
  • Handle: RePEc:apl:wpaper:20-01
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    References listed on IDEAS

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    More about this item

    Keywords

    discount rate; mixed logit; discrete choice experiment;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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