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Eliciting time preferences when income and consumption vary: Theory, validation & application to job search

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  • Michele Belot

    (Cornell University)

  • Philipp Kircher

    (Cornell University)

  • Paul Muller

    (Vrije Universiteit Amsterdam)

Abstract

We propose a simple method for eliciting individual time preferences without estimating utility functions even in settings where background consumption changes over time. It relies on lottery tickets with high rewards. In a standard intertemporal choice model high rewards decouple lottery choices from variation in background consumption. We validate our elicitation method experimentally on two student samples: one asked in December when their current budget is reduced by extraordinary expenditures for Christmas gifts; the other asked in February when no such extra constraints exist. We illustrate an application of our method with unemployed job seekers which naturally have income/consumption variation.

Suggested Citation

  • Michele Belot & Philipp Kircher & Paul Muller, 2021. "Eliciting time preferences when income and consumption vary: Theory, validation & application to job search," Tinbergen Institute Discussion Papers 21-013/V, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20210013
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    References listed on IDEAS

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    More about this item

    Keywords

    time preferences; experimental elicitation; job search; hyperbolic discounting;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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