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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.

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File URL: http://www.nber.org/papers/w11935.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11935.

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Date of creation: Jan 2006
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Handle: RePEc:nbr:nberwo:11935
Note: HC LE PE EEE
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  1. Read, Daniel, 2001. " Is Time-Discounting Hyperbolic or Subadditive?," Journal of Risk and Uncertainty, Springer, vol. 23(1), pages 5-32, July.
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  11. Laibson, David I., 1997. "Golden Eggs and Hyperbolic Discounting," Scholarly Articles 4481499, Harvard University Department of Economics.
  12. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
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  16. Cropper, Maureen L & Aydede, Sema K & Portney, Paul R, 1994. "Preferences for Life Saving Programs: How the Public Discounts Time and Age," Journal of Risk and Uncertainty, Springer, vol. 8(3), pages 243-65, May.
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