Economics & Business Faculty Work
Title
Estimating Discount Factors for Public and Private Goods and Testing Competing Discounting Hypotheses
Document Type
Article
Publication Date
2013
Publication Title
Journal of Risk and Uncertainty
Volume Number
46
Issue Number
2
DOI
10.1007/s11166-013-9163-y
Abstract
The observation of declining discount rates in experimental settings has led many to promote hyperbolic discounting over standard exponential discounting as the preferred descriptive model of intertemporal choice. I develop a new framework, consistent with the random utility model, which directly models the intertemporal utility function and produces explicit maximum likelihood estimates of discounting parameters. I apply this estimation method to a stated-preference survey of river basin cleanup options and revealed-preference lottery payment choices. Formal statistical tests fail to find evidence in support of hyperbolic or quasi-hyperbolic discounting. Annual discount rates range from ten to fourteen percent across the data sets and empirical specifications.
ISSN
0895-5646
First Page
133
Last Page
173
Recommended Citation
Meyer, Andrew, "Estimating Discount Factors for Public and Private Goods and Testing Competing Discounting Hypotheses" (2013). Economics & Business Faculty Work. 11.
https://digitalcommons.owu.edu/econ_pubs/11
Link Out URL
https://doi.org/10.1007/s11166-013-9163-y