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Are time preferences for risky outcomes, riskless outcomes and commodities really different?

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  • Shavit, Tal
  • Benzion, Uri
  • Shapir, Offer Moshe
  • Galil, Koresh

Abstract

This paper suggests that part of the implied time Subjective Discount Rate (SDR) collected by Willingness To Pay (WTP) is an immediate premium. We offer a theoretical and experimental analysis of the gross SDR, which consists of the immediate premium and the net SDR (i.e., SDR less the immediate premium). We find that the net SDR for an assured monetary payment is no different than the SDR for a lottery or USB stick. However, the gross SDR for the assured outcome is higher than the SDR for a lottery or the USB stick.

Suggested Citation

  • Shavit, Tal & Benzion, Uri & Shapir, Offer Moshe & Galil, Koresh, 2013. "Are time preferences for risky outcomes, riskless outcomes and commodities really different?," Economics Letters, Elsevier, vol. 118(3), pages 512-514.
    • Handle: RePEc:eee:ecolet:v:118:y:2013:i:3:p:512-514
    DOI: 10.1016/j.econlet.2013.01.001
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    References listed on IDEAS

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    Cited by:

    1. Choung, Youngjoo & Chatterjee, Swarn & Pak, Tae-Young, 2022. "Depression and financial planning horizon," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 98(C).
    2. Bayer, Ya‘akov M. & Shtudiner, Zeev & Suhorukov, Oxsana & Grisaru, Nimrod, 2019. "Time and risk preferences, and consumption decisions of patients with clinical depression," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 78(C), pages 138-145.
    3. David-Pur, Lior & Galil, Koresh & Rosenboim, Mosi, 2020. "To decrease or not to decrease: The impact of zero and negative interest rates on investment decisions," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 87(C).
    4. Hurwitz, Abigail & Lahav, Eyal & Mugerman, Yevgeny, 2021. "“Financial less is more”: An experimental study of financial communication," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 94(C).

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    More about this item

    Keywords

    Time-preference; Risk; WTP; SDR;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects

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