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Can Hypothetical Time Discounting Rates Predict Actual Behaviour: Evidence from a Randomized Experiment

Author

Listed:
  • Jacopo Bonan

    (Fondazione Eni Enrico Mattei (FEEM))

  • Philippe LeMay-Boucher

    (Heriot-Watt University)

  • Douglas Scott

    (The University of Nottingham)

Abstract

This paper estimates time preference parameters using commonly-applied methodologies, with the aim of investigating the link between these measures and actual economic behaviour. An experiment was conducted in the city of Thies, in Senegal, using the unique reference numbers of banknotes as a means of determining an individual’s willingness to save money. The findings of this experiment provide an innovative comparison between real choices, and choices made in the presence of hypothetical rewards. Our research indicates that individuals display a far greater degree of patience, when the possibility of genuine financial gain is made available to them. Our results show that hypothetical time preferences parameters are poor predictors of actual behaviour, prompting questions over the validity of commonly used measurements.

Suggested Citation

  • Jacopo Bonan & Philippe LeMay-Boucher & Douglas Scott, 2016. "Can Hypothetical Time Discounting Rates Predict Actual Behaviour: Evidence from a Randomized Experiment," Working Papers 2016.74, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2016.74
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Time Preferences; Randomized Experiment; Senegal;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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