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Eliciting Time Preferences When Income and Consumption Vary: Theory, Validation, and Application to Job Search

Author

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  • Michèle Belot
  • Philipp Kircher
  • Paul Muller

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 eliciting preferences for receiving high stakes lottery tickets at different points in time. In a standard intertemporal choice model high rewards decouple lottery choices from variation in background consumption. We investigate robustness to other assumptions theoretically, and validate our elicitation method experimentally. We illustrate an application of our method with unemployed job seekers, which naturally have income/consumption variation.

Suggested Citation

  • Michèle Belot & Philipp Kircher & Paul Muller, 2025. "Eliciting Time Preferences When Income and Consumption Vary: Theory, Validation, and Application to Job Search," American Economic Journal: Microeconomics, American Economic Association, vol. 17(1), pages 130-170, February.
    • Handle: RePEc:aea:aejmic:v:17:y:2025:i:1:p:130-70
    DOI: 10.1257/mic.20220118
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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