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

Link Out URL

https://doi.org/10.1007/s11166-013-9163-y

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