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Preference for increasing wages: How do people value various streams of income?

  • Duffy, Sean
  • Smith, John

Prior studies have found that subjects prefer an improving sequence of income over a constant sequence, even if the constant sequence offers a larger present discounted value. However, little is known about how these preferences vary with the size of the wage payments. In each of our three studies, we find a relationship between the preference for increasing payments and the size of the payments. Further, our measure of the shape of the utility curve is not significantly related to this behavior. Our results roughly confirm an earlier theoretical prediction that the preference for increasing wage payments will be largest for payments which are neither very likely nor very unlikely to cover the cost of effort. Finally, consistent with the literature, we find mixed evidence regarding the applicability of these time preferences in domains other than money.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23559.

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Date of creation: 28 Jun 2010
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Handle: RePEc:pra:mprapa:23559
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  23. Catherine C. Eckel & Philip J. Grossman, 2008. "Forecasting Risk Attitudes: An Experimental Study Using Actual and Forecast Gamble Choices," Monash Economics Working Papers archive-01, Monash University, Department of Economics.
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