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Eliciting utility curvature in time preference

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  • Stephen L. Cheung

    (The University of Sydney
    IZA Institute of Labor Economics)

Abstract

This paper examines the effects of alternative assumptions regarding the curvature of utility upon estimated discount rates in experimental data. To do so, it introduces a novel design to elicit time preference building upon a translation of the Holt and Laury method for risk. The results demonstrate that utility elicited directly from choice over time is significantly concave, but far closer to linear than utility elicited under risk. As a result, the effect of adjusting discount rates for this curvature is modest compared to assuming linear utility, and considerably less than when utility from a risk preference task is imposed.

Suggested Citation

  • Stephen L. Cheung, 2020. "Eliciting utility curvature in time preference," Experimental Economics, Springer;Economic Science Association, vol. 23(2), pages 493-525, June.
    • Handle: RePEc:kap:expeco:v:23:y:2020:i:2:d:10.1007_s10683-019-09621-2
    DOI: 10.1007/s10683-019-09621-2
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    More about this item

    Keywords

    Time preference; Measurement of utility; Discounted utility; Choice list;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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