Journal
JOURNAL OF RISK AND UNCERTAINTY
Volume 44, Issue 3, Pages 181-217Publisher
SPRINGER
DOI: 10.1007/s11166-012-9144-6
Keywords
Discount rate; Intertemporal decision making; Binary lottery procedure; Experiment
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We propose and test a new method for eliciting curvature-controlled discount rates that are invariant to the form of the utility function. Our method uses a single elicitation task and obtains individual discount rates without knowledge of risk attitude or parametric assumptions about the form of the utility function. We compare our method to a double elicitation technique in which the utility function and discount rate are jointly estimated. Our experiment shows that these methods yield consistent estimates of the discount rate, which is reassuring given the wide range of estimates in the literature. We find little evidence of probability weighting, but in a second experiment, we observe that discount rates are sensitive to the length of the front-end delay, suggesting present bias. When the front-end delay is at least two weeks, we estimate average discount rates to be 11.3 and 12.2% in the two experiments.
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