Measuring Preferences Over the Temporal Resolution of Consumption Uncertainty
58 Pages Posted: 3 Sep 2015 Last revised: 18 Jan 2021
Date Written: January 17, 2021
Abstract
Timing premia measure how much consumption people are willing to forgo to resolve all consumption uncertainty immediately. We develop a novel experiment that allows to elicit these attitudes directly, in a model-free way. On average subjects forgo around 5\% of their total consumption to resolve all uncertainty immediately. Recursive utility models postulate a structural link between timing premia and deep preference parameters. We elicit these preference parameters separately, and estimate corresponding predicted timing premia. Comparing directly elicited and predicted timing premia allows to test this structural link. Surprisingly, we find a negative correlation between predicted and elicited timing premia.
Keywords: Recursive Utility, Timing of Resolution of Uncertainty, Preference Elicitation, Timing Premia, Risk and Time Preferences
JEL Classification: C90, D80, D90
Suggested Citation: Suggested Citation