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Hyperbolic Discounting of Public Goods


  • W. Kip Viscusi
  • Joel Huber


This article examines revealed rates of time preference for public goods, using environmental quality as the case study. A nationally representative panel-based sample of 2,914 respondents considered a series of 5 conjoint policy choices, yielding 14,570 decisions. Both the conditional fixed effect logit estimates of the random utility model and mixed logit estimates implied that the rate of time preference is very high for immediate improvements and drops off substantially thereafter, which is inconsistent with exponential discounting but consistent with hyperbolic discounting. The implied marginal rate of time preference declines and then rises. Estimates of the quasi-hyperbolic discounting parameter range from 0.48 to 0.61. People who are older are especially likely to have a high disutility from delays in improving water quality.

Suggested Citation

  • W. Kip Viscusi & Joel Huber, 2006. "Hyperbolic Discounting of Public Goods," NBER Working Papers 11935, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11935
    Note: HC LE PE EEE

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    References listed on IDEAS

    1. Joel Huber and Kenneth Train., 2000. "On the Similarity of Classical and Bayesian Estimates of Individual Mean Partworths," Economics Working Papers E00-289, University of California at Berkeley.
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    5. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, May.
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    13. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 443-478.
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    Cited by:

    1. Daniel H. Cole, 2007. "The Stern Review and its critics: implications for the theory and practice of costs-benefits analysis," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 4, November.
    2. BÃ¥rd Harstad, 2013. "Investment Policy for Time-Inconsistent Discounters," CESifo Working Paper Series 4546, CESifo Group Munich.
    3. Sanjay Jain, 2009. "Self-Control and Optimal Goals: A Theoretical Analysis," Marketing Science, INFORMS, vol. 28(6), pages 1027-1045, 11-12.

    More about this item

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General

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