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Stability of Time Preferences

Author

Listed:
  • Meier, Stephan

    () (Columbia University)

  • Sprenger, Charles

    () (Stanford University)

Abstract

Individuals frequently face intertemporal decisions. For the purposes of economic analysis, the preference parameters assumed to govern these decisions are generally considered to be stable economic primitives. However, evidence on the stability of time preferences is notably lacking. In a large field study conducted over two years with about 1,400 individuals, time preferences are elicited using incentivized choice experiments. The aggregate distributions of discount factors and the proportion of present-biased individuals are found to be unchanged over the two years. At the individual level, the one year correlations in measured time preference parameters are found to be high by existing standards, though some individuals change their intertemporal choices potentially indicating unstable preferences. By linking time preference measures to tax return data, we show that identified instability is uncorrelated with socio-demographics and changes to income, future liquidity, employment and family composition.

Suggested Citation

  • Meier, Stephan & Sprenger, Charles, 2010. "Stability of Time Preferences," IZA Discussion Papers 4756, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4756
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. IZA Paper: Stability of Time Preferences
      by Liam Delaney in Geary Behaviour Centre on 2011-02-28 07:19:00

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    Cited by:

    1. Gine, Xavier & Goldberg, Jessica & Silverman, Dan & Yang, Dean, 2012. "Revising commitments : field evidence on the adjustment of prior choices," Policy Research Working Paper Series 6093, The World Bank.
    2. Battisti, Michele, 2015. "Present-biased preferences and optimal compensation schedules: a note," MPRA Paper 64818, University Library of Munich, Germany.
    3. Markus Sass & Joachim Weimann, 2012. "The Dynamics of Individual Preferences in Repeated Public Good Experiments," FEMM Working Papers 120002, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    4. Bruderer Enzler, Heidi & Diekmann, Andreas & Meyer, Reto, 2014. "Subjective discount rates in the general population and their predictive power for energy saving behavior," Energy Policy, Elsevier, vol. 65(C), pages 524-540.
    5. Oswald, Yvonne & Backes-Gellner, Uschi, 2014. "Learning for a bonus: How financial incentives interact with preferences," Journal of Public Economics, Elsevier, vol. 118(C), pages 52-61.
    6. Fouarge, Didier & Kriechel, Ben & Dohmen, Thomas, 2014. "Occupational sorting of school graduates: The role of economic preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 335-351.
    7. Jose Apesteguia & Miguel A. Ballester, 2014. "Discrete choice estimation of time preferences," Economics Working Papers 1442, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Volk, Stefan & Thöni, Christian & Ruigrok, Winfried, 2012. "Temporal stability and psychological foundations of cooperation preferences," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 664-676.
    9. Kristopher S. Gerardi & Lorenz Goette & Stephan Meier, 2010. "Financial literacy and subprime mortgage delinquency: evidence from a survey matched to administrative data," FRB Atlanta Working Paper 2010-10, Federal Reserve Bank of Atlanta.
    10. Charles Courtemanche & Garth Heutel & Patrick McAlvanah, 2015. "Impatience, Incentives and Obesity," Economic Journal, Royal Economic Society, vol. 125(582), pages 1-31, February.
    11. Clot, Sophie & Stanton, Charlotte Y., 2014. "Present bias predicts participation in payments for environmental services: Evidence from a behavioral experiment in Uganda," Ecological Economics, Elsevier, vol. 108(C), pages 162-170.

    More about this item

    Keywords

    preference stability; time preferences; experimental economics;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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