Working Paper: NBER ID: w21095
Authors: Keith Marzilli Ericson; Jawwad Noor
Abstract: Delay functions, which vary timing of rewards but fix the money dimension, can elicit the form of discount functions with minimal assumptions. We present a general theorem that characterizes the set of discount functions and utility indices compatible with any 'regular' preference. We provide conditions to test for separable discounted utility (SDU). We elicit individual delay functions for a range of amounts and time horizons. When we impose SDU assumptions, we classify more than half our analysis sample as exponential discounters. However, we reject SDU assumptions for 68% of the sample in favor of magnitude-dependent discounting with time distortion.
Keywords: Time Preference; Discount Functions; Behavioral Economics
JEL Codes: D01; D03; D9; D91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| delay functions (C41) | discount functions (H43) |
| rejection of SDU assumption (C29) | implications for generalizing experimental results (C90) |
| rejection of SDU assumption (C29) | magnitude-dependent discounting (D15) |
| magnitude-dependent discounting (D15) | rejection of SDU model (C52) |
| observed behavior (k=0) (C99) | exponential discounting under SDU model (D15) |
| different magnitudes of rewards (D80) | rejection of SDU model (C52) |
| delay function approach (C41) | insights into discounting behavior (D15) |