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Myopic preferences or subsistence income? Why do rickshaw cyclists rent the cycle?

Listed author(s):
  • Magnus Hatlebakk

One year rent is sufficient to buy a rickshaw in the plains of Nepal, while a rickshaw will last many years, so purchase appears very profitable. Still most cyclists rent the rickshaw. Based on choices made by rickshaw pullers between hypothetical financing schemes for rickshaws we investigate whether the explanation is a high time-preference rate or a high elasticity of the marginal utility of consumption, which in turn can be explained by preferences that are formed by consumption near a subsistence level. We find that subsistence constraints are more important than myopic preferences.

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File URL: https://www.cmi.no/publications/file/4368-myopic-preferences-or-subsistence-income.pdf
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Paper provided by CMI (Chr. Michelsen Institute), Bergen, Norway in its series CMI Working Papers with number 1.

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Length: 15 pages
Date of creation: 2012
Handle: RePEc:chm:wpaper:wp2012-1
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  1. Magnus Hatlebakk, 2009. "Capacity-constrained Collusive Price Discrimination in the Informal Rural Credit Markets of Nepal," Review of Development Economics, Wiley Blackwell, vol. 13(1), pages 70-86, 02.
  2. Jeffery Carpenter & Juan Camilo Cardenas, 2006. "Behavioural Development Economics: Lessons from field labs in the developing world," Middlebury College Working Paper Series 0616, Middlebury College, Department of Economics.
  3. Masao Ogaki & Andrew Atkeson, 1997. "Rate Of Time Preference, Intertemporal Elasticity Of Substitution, And Level Of Wealth," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 564-572, November.
  4. Robert H. Frank, 2005. "Positional Externalities Cause Large and Preventable Welfare Losses," American Economic Review, American Economic Association, vol. 95(2), pages 137-141, May.
  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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