Abstract

http://ssrn.com/abstract=921425
 
 

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Hyperbolic Discounting of Public Goods


W. Kip Viscusi


Vanderbilt University - Law School; National Bureau of Economic Research (NBER); Vanderbilt University - Department of Economics; Vanderbilt University - Owen Graduate School of Management; Vanderbilt University - Strategy and Business Economics

Joel C. Huber


Duke University - Fuqua School of Business

February 2006

Harvard Law and Economics Discussion Paper No. 543

Abstract:     
This article examines revealed rates of time preference for public goods, using environmental quality as the case study. A nationally representative panel-based sample of 2,914 respondents considered a series of 5 conjoint policy choices, yielding 14,570 decisions. Both the conditional fixed effect logit estimates of the random utility model and mixed logit estimates implied that the rate of time preference is very high for immediate improvements and drops off substantially thereafter, which is inconsistent with exponential discounting but consistent with hyperbolic discounting. The implied marginal rate of time preference declines and then rises. Estimates of the quasi-hyperbolic discounting parameter range from 0.48 to 0.61. People who are older are especially likely to have a high disutility from delays in improving water quality.

Number of Pages in PDF File: 43

Keywords: hyperbolic discounting, intertemporal choice, time preference, environment

JEL Classification: Q20, D90, H40

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Date posted: July 31, 2006  

Suggested Citation

Viscusi, W. Kip and Huber, Joel C., Hyperbolic Discounting of Public Goods (February 2006). Harvard Law and Economics Discussion Paper No. 543. Available at SSRN: http://ssrn.com/abstract=921425 or http://dx.doi.org/10.2139/ssrn.921425

Contact Information

W. Kip Viscusi (Contact Author)
Vanderbilt University - Law School ( email )
131 21st Avenue South
Nashville, TN 37203-1181
United States
615-343-7715 (Phone)
615-322-5953 (Fax)
HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Vanderbilt University - Department of Economics
Box 1819 Station B
Nashville, TN 37235
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)
HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm
Vanderbilt University - Owen Graduate School of Management
401 21st Avenue South
Nashville, TN 37203
United States
(615) 343-7715 (Phone)
(615) 343-5953 (Fax)
HOME PAGE: http://law.vanderbilt.edu/faculty/viscusi.htm
Vanderbilt University - Strategy and Business Economics ( email )
Nashville, TN 37203
United States

Joel C. Huber
Duke University - Fuqua School of Business ( email )
Box 90120
Durham, NC 27708-0120
United States
919-660-7785 (Phone)
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