Estimating Time Preferences from Convex Budgets

Andreoni, James and Sprenger, Charles

(2012)

Estimating Time Preferences from Convex Budgets.

American Economic Review, 102
(7).

pp. 3333-3356.
ISSN 0002-8282.

https://resolver.caltech.edu/CaltechAUTHORS:20200724-132913042

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Abstract

Experimentally elicited discount rates are frequently higher than what seems reasonable for economic decision-making. Such high rates are often attributed to present-biased discounting. A well-known bias of standard measurements is the assumption of linear consumption utility. Attempting to correct this bias using measures of risk aversion to identify concavity, researchers find reasonable discounting but at the cost of exceptionally high utility function curvature. We present a new methodology for identifying time preferences, both discounting and curvature, from simple allocation decisions. We find reasonable levels of both discounting and curvature and, surprisingly, dynamically consistent time preferences.

Item Type: Article
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Additional Information: © 2012 American Economic Association.

We are grateful for the insightful comments of four anonymous referees, and our many colleagues, including Nageeb Ali, Douglas Berhneim, Michèlle Cohen, Tore Ellingsen, Ed Glaeser, Glenn Harrison, David Laibson, Antonio Rangel, Al Roth, Andrew Schotter, and participants at the Economics and Psychology lecture series at Paris 1, the Psychology and Economics segment at Stanford Institute of Theoretical Economics 2009, the Amsterdam Workshop on Behavioral and Experimental Economics 2009, the Harvard Experimental and Behavioral Economics Seminar, and members of the graduate experimental economics courses at Stanford University and the University of Pittsburgh. We also acknowledge the generous support of the National Science Foundation, grant SES-0962484 (Andreoni) and grant SES-1024683 (Andreoni and Sprenger).
Funders:
Funding Agency Grant Number
NSF SES-0962484
NSF SES-1024683
Issue or Number: 7
Record Number: CaltechAUTHORS:20200724-132913042
Persistent URL: https://resolver.caltech.edu/CaltechAUTHORS:20200724-132913042
Official Citation: Andreoni, James, and Charles Sprenger. 2012. “Estimating Time Preferences from Convex Budgets.” American Economic Review, 102 (7): 3333-56.
DOI: 10.1257/aer.102.7.3333
Usage Policy: No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code: 104574
Collection: CaltechAUTHORS
Deposited By:

Tony Diaz

Deposited On: 24 Jul 2020 21:11
Last Modified: 24 Jul 2020 21:11

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