IDEAS home Printed from https://ideas.repec.org/p/ags/gadadp/260784.html
   My bibliography  Save this paper

Measuring farmers’ time preference – A comparison of methods

Author

Listed:
  • Hermann, Daniel
  • Mußhoff, Oliver
  • Rüther, Dörte

Abstract

The discount rate is of great importance for all decisions in an intertemporal context, such as the decision of how much a society invests in environmental preservation, or the financial decision- making on the individual level. This study experimentally investigates the time preferences of farmers by comparing two different methods: One method is based on the measurement of time preference and risk attitude that are elicited in two parts of an experiment. Afterwards, the dis- count rate is adjusted using the risk attitude. The other method uses a one-parameter approach without the necessity of separately eliciting the individual risk attitude and without an assumption regarding the form of the utility function. The results reveal that, contrary to previous research, the ascertained discount rates of both methods are different. Furthermore, only the method based on the measurement of time preference and risk attitude separately reveals sensitivities regarding the prospective payout.

Suggested Citation

  • Hermann, Daniel & Mußhoff, Oliver & Rüther, Dörte, 2015. "Measuring farmers’ time preference – A comparison of methods," Department of Agricultural and Rural Development (DARE) Discussion Papers 260784, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    • Handle: RePEc:ags:gadadp:260784
    DOI: 10.22004/ag.econ.260784
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/260784/files/Diskussionsbeitrag_1506.pdf
    Download Restriction: no
    File URL: https://ageconsearch.umn.edu/record/260784/files/Diskussionsbeitrag_1506.pdf?subformat=pdfa
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.260784?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Martin Ahlbrecht & Martin Weber, 1997. "An Empirical Study on Intertemporal Decision Making Under Risk," Management Science, INFORMS, vol. 43(6), pages 813-826, June.
    2. Andersen, Steffen & Harrison, Glenn W. & Lau, Morten I. & Rutström, E. Elisabet, 2014. "Discounting behavior: A reconsideration," European Economic Review, Elsevier, vol. 71(C), pages 15-33.
    3. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
    4. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2008. "Eliciting Risk and Time Preferences," Econometrica, Econometric Society, vol. 76(3), pages 583-618, May.
    5. repec:feb:framed:0071 is not listed on IDEAS
    6. Susan Laury & Melayne McInnes & J. Todd Swarthout, 2012. "Avoiding the curves: Direct elicitation of time preferences," Journal of Risk and Uncertainty, Springer, vol. 44(3), pages 181-217, June.
    7. Harrison, Glenn W. & Lau, Morten I. & Elisabet Rutström, E., 2009. "Risk attitudes, randomization to treatment, and self-selection into experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 70(3), pages 498-507, June.
    8. James Andreoni & Charles Sprenger, 2012. "Estimating Time Preferences from Convex Budgets," American Economic Review, American Economic Association, vol. 102(7), pages 3333-3356, December.
    9. Vital Anderhub & Werner Güth & Uri Gneezy & Doron Sonsino, 2001. "On the Interaction of Risk and Time Preferences: An Experimental Study," German Economic Review, Verein für Socialpolitik, vol. 2(3), pages 239-253, August.
    10. Glenn W. Harrison & John A. List, 2008. "Naturally Occurring Markets and Exogenous Laboratory Experiments: A Case Study of the Winner's Curse," Economic Journal, Royal Economic Society, vol. 118(528), pages 822-843, April.
    11. Lisa Anderson & Sarah Stafford, 2009. "Individual decision-making experiments with risk and intertemporal choice," Journal of Risk and Uncertainty, Springer, vol. 38(1), pages 51-72, February.
    12. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    13. Uri Benzion & Amnon Rapoport & Joseph Yagil, 1989. "Discount Rates Inferred from Decisions: An Experimental Study," Management Science, INFORMS, vol. 35(3), pages 270-284, March.
    14. Lence, Sergio H., 2000. "Using Consumption and Asset Return Data to Estimate Farmersï¾’ Time Preferences and Risk Attitudes," Staff General Research Papers Archive 1930, Iowa State University, Department of Economics.
    15. Bocquého, Géraldine & Jacquet, Florence & Reynaud, Arnaud, 2013. "Reversal and magnitude effects in long-term time preferences: Results from a field experiment," Economics Letters, Elsevier, vol. 120(1), pages 108-111.
    16. Andersen, Steffen & Harrison, Glenn W. & Lau, Morten Igel & Rutström, E. Elisabet, 2010. "Preference heterogeneity in experiments: Comparing the field and laboratory," Journal of Economic Behavior & Organization, Elsevier, vol. 73(2), pages 209-224, February.
    17. Catherine C. Eckel & Philip J. Grossman, 2008. "Forecasting Risk Attitudes: An Experimental Study Using Actual and Forecast Gamble Choices," Monash Economics Working Papers archive-01, Monash University, Department of Economics.
    18. David H. Herberich & John A. List, 2012. "Digging into Background Risk: Experiments with Farmers and Students," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 457-463.
    19. Lambson, Val Eugene & Jensen, Farrell E, 1995. "Sunk Costs and the Variability of Firm Value over Time," The Review of Economics and Statistics, MIT Press, vol. 77(3), pages 535-544, August.
    20. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    21. Jochen Meyer & Stephan von Cramon‐Taubadel, 2004. "Asymmetric Price Transmission: A Survey," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 581-611, November.
    22. Maribeth Coller & Melonie Williams, 1999. "Eliciting Individual Discount Rates," Experimental Economics, Springer;Economic Science Association, vol. 2(2), pages 107-127, December.
    23. Benhabib, Jess & Bisin, Alberto & Schotter, Andrew, 2010. "Present-bias, quasi-hyperbolic discounting, and fixed costs," Games and Economic Behavior, Elsevier, vol. 69(2), pages 205-223, July.
    24. Steffen Andersen & Glenn Harrison & Morten Lau & E. Rutström, 2009. "Elicitation using multiple price list formats," Experimental Economics, Springer;Economic Science Association, vol. 12(3), pages 365-366, September.
    25. Keith Coble & Jayson Lusk, 2010. "At the nexus of risk and time preferences: An experimental investigation," Journal of Risk and Uncertainty, Springer, vol. 41(1), pages 67-79, August.
    26. Selçuk Onay & Ayse Öncüler, 2007. "Intertemporal choice under timing risk: An experimental approach," Journal of Risk and Uncertainty, Springer, vol. 34(2), pages 99-121, April.
    27. Sergio H. Lence, 2000. "Using Consumption and Asset Return Data to Estimate Farmers' Time Preferences and Risk Attitudes," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 934-947.
    28. Nicky J. Welton & Howard H. Z. Thom, 2015. "Value of Information," Medical Decision Making, , vol. 35(5), pages 564-566, July.
    29. Steffen Andersen & Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2013. "Discounting Behaviour and the Magnitude Effect: Evidence from a Field Experiment in Denmark," Economica, London School of Economics and Political Science, vol. 80(320), pages 670-697, October.
    30. Duquette, Eric & Higgins, Nathaniel & Horowitz, John, 2014. "Inferring discount rates from time-preference experiments," Economics Letters, Elsevier, vol. 123(2), pages 212-215.
    31. Eric Duquette & Nathaniel Higgins & John Horowitz, 2012. "Farmer Discount Rates: Experimental Evidence," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 451-456.
    32. Sabine Liebenehm & Hermann Waibel, 2014. "Simultaneous Estimation of Risk and Time Preferences among Small-scale Cattle Farmers in West Africa," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1420-1438.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Janusch, Nicholas & Palm-Forster, Leah H. & Messer, Kent D. & Ferraro, Paul J., 2017. "Behavioral Insights for Agri-Environmental Program and Policy Design," 2018 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2018, Philadelphia, Pennsylvania 266299, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hermann, Daniel & Rüther, Dörte & Mußhoff, Oliver, 2015. "Die Zeitpräferenz von Landwirten," Die Unternehmung - Swiss Journal of Business Research and Practice, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 69(4), pages 396-417.
    2. Hermann, Daniel & Musshoff, Oliver, 2016. "Measuring time preferences: Comparing methods and evaluating the magnitude effect," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 65(C), pages 16-26.
    3. Galizzi, Matteo M. & Miraldo, Marisa & Stavropoulou, Charitini & van der Pol, Marjon, 2016. "Doctor–patient differences in risk and time preferences: A field experiment," Journal of Health Economics, Elsevier, vol. 50(C), pages 171-182.
    4. Jindrich Matousek & Tomas Havranek & Zuzana Irsova, 2022. "Individual discount rates: a meta-analysis of experimental evidence," Experimental Economics, Springer;Economic Science Association, vol. 25(1), pages 318-358, February.
    5. Filiz-Ozbay, Emel & Guryan, Jonathan & Hyndman, Kyle & Kearney, Melissa & Ozbay, Erkut Y., 2015. "Do lottery payments induce savings behavior? Evidence from the lab," Journal of Public Economics, Elsevier, vol. 126(C), pages 1-24.
    6. Rodriguez-Lara, Ismael & Ponti, Giovanni, 2017. "Social motives vs social influence: An experiment on interdependent time preferences," Games and Economic Behavior, Elsevier, vol. 105(C), pages 177-194.
    7. Andersen, Steffen & Harrison, Glenn W. & Lau, Morten I. & Rutström, E. Elisabet, 2014. "Discounting behavior: A reconsideration," European Economic Review, Elsevier, vol. 71(C), pages 15-33.
    8. Ubfal, Diego, 2016. "How general are time preferences? Eliciting good-specific discount rates," Journal of Development Economics, Elsevier, vol. 118(C), pages 150-170.
    9. Keith Coble & Jayson Lusk, 2010. "At the nexus of risk and time preferences: An experimental investigation," Journal of Risk and Uncertainty, Springer, vol. 41(1), pages 67-79, August.
    10. Irvine, Alastair & van der Pol, Marjon & Phimister, Euan, 2019. "A comparison of professional and private time preferences of General Practitioners," Social Science & Medicine, Elsevier, vol. 222(C), pages 256-264.
    11. Belzil, Christian & Sidibé, Modibo, 2016. "Internal and External Validity of Experimental Risk and Time Preferences," IZA Discussion Papers 10348, Institute of Labor Economics (IZA).
    12. Thomas Epper & Helga Fehr-Duda & Adrian Bruhin, 2011. "Viewing the future through a warped lens: Why uncertainty generates hyperbolic discounting," Journal of Risk and Uncertainty, Springer, vol. 43(3), pages 169-203, December.
    13. Alina Ferecatu & Ayse Önçüler, 2016. "Heterogeneous risk and time preferences," Journal of Risk and Uncertainty, Springer, vol. 53(1), pages 1-28, August.
    14. Stein T. Holden & John Quiggin, 2017. "Bounded awareness and anomalies in intertemporal choice: Zooming in Google Earth as both metaphor and model," Journal of Risk and Uncertainty, Springer, vol. 54(1), pages 15-35, February.
    15. OUATTARA, Aboudou & DE LA BRUSLERIE, Hubert, 2015. "The term structure of psychological discount rate: characteristics and functional forms," MPRA Paper 75111, University Library of Munich, Germany.
    16. Meyer, Andrew G., 2015. "The impacts of elicitation mechanism and reward size on estimated rates of time preference," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 58(C), pages 132-148.
    17. Stephen L. Cheung, 2020. "Eliciting utility curvature in time preference," Experimental Economics, Springer;Economic Science Association, vol. 23(2), pages 493-525, June.
    18. Duquette, Eric & Higgins, Nathaniel & Horowitz, John, 2014. "Inferring discount rates from time-preference experiments," Economics Letters, Elsevier, vol. 123(2), pages 212-215.
    19. Andrew G. Meyer, 2016. "Explaining the fixed cost component of discounting: the importance of students' liquidity constraints," Economics Bulletin, AccessEcon, vol. 36(1), pages 355-364.
    20. Lloyd-Smith, Patrick & Adamowicz, Wiktor & Entem, Alicia & Fenichel, Eli P. & Rouhi Rad, Mani, 2021. "The decade after tomorrow: Estimation of discount rates from realistic temporal decisions over long time horizons," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 158-174.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:gadadp:260784. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/iagoede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.