Eliciting Risk and Time Preferences

Abstract

Abstract. We design experiments to jointly elicit risk and time preferences for the adult Danish population. We find that joint elicitation results in estimates of discount rates that are dramatically lower than those found in previous studies. Estimation of latent time preferences requires that one specify a theoretical structure to understand risk and time choices, but we show that our main results, based on exponential discounting and expected utility theory, are robust to popular alternative specifications such as hyperbolic discounting and prospect theoretic formulations of choice under uncertainty. We also report evidence favoring standard, exponential discounting over hyperbolic. These results have direct implications for attempts to elicit time preferences, as well as debates over the appropriate domain of the utility function when characterizing risk aversion and time consistency.

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@inproceedings{Andersen2006ElicitingRA, title={Eliciting Risk and Time Preferences}, author={Steffen Andersen and Glenn W. Harrison and Morten Igel Lau and Elisabet Rutstr{\"{o}m}, year={2006} }