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Eliciting Individual-Specific Discount Rates

Author

Listed:
  • Trudy Ann Cameron

    () (Department of Economics, University of Oregon)

  • Geoffrey R. Gerdes

    () (Federal Reserve Board of Governors)

Abstract

Longstanding debate over the appropriate social discount rate for public projects stems from our lack of knowledge about how individual discount rates vary across people and across choice contexts. Using a sample of roughly 15,000 choices by over 2000 individuals, we estimate utility theoretic models concerning private tradeoffs involving money over time that reveal individual specific discount rates. We control for experimentally differentiated choice scenarios, sociodemographic heterogeneity, and elicitation formats, and complex forms of heteroscedasticity. Statistically significant heterogeneity in discount rates is quantified for both an exponential discounting model and a competing hyperbolic model, but neither specification clearly dominates.

Suggested Citation

  • Trudy Ann Cameron & Geoffrey R. Gerdes, 2003. "Eliciting Individual-Specific Discount Rates," University of Oregon Economics Department Working Papers 2003-10, University of Oregon Economics Department, revised 01 Jan 2003.
  • Handle: RePEc:ore:uoecwp:2003-10
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    File URL: http://economics.uoregon.edu/papers/UO-2003-10_Cameron_Gerdes_discount.pdf
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    Cited by:

    1. Andrew Meyer, 2013. "Estimating discount factors for public and private goods and testing competing discounting hypotheses," Journal of Risk and Uncertainty, Springer, vol. 46(2), pages 133-173, April.

    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H4 - Public Economics - - Publicly Provided Goods
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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