How to Measure Discount Rates? An Experimental Comparison of Three Methods

42 Pages Posted: 19 Nov 2011

See all articles by David J. Hardisty

David J. Hardisty

Sauder School of Business

Katherine Fox-Glassman

Columbia University - Department of Psychology

David Krantz

Columbia University

Elke U. Weber

Princeton University - Department of Psychology

Date Written: November 1, 2011

Abstract

Time preferences for financial and air quality gains and losses at delays of up to 50 years were elicited using three different methods: matching, fixed-sequence choice titration, and a dynamic "multiple staircase" choice method. Results indicate that the choice-based methods are prone to influencing participants' discount rates through the magnitude and order of options presented to participants. However, choice-based methods are easier for participants to understand than matching is, and are better at predicting consequential intertemporal choices such as smoking. No consistent advantages were found for the multiple staircase over simple titration. Implications for best practice are discussed.

Suggested Citation

Hardisty, David J. and Fox-Glassman, Katherine Thompson and Krantz, David and Weber, Elke U., How to Measure Discount Rates? An Experimental Comparison of Three Methods (November 1, 2011). Available at SSRN: https://ssrn.com/abstract=1961367 or http://dx.doi.org/10.2139/ssrn.1961367

Katherine Thompson Fox-Glassman

Columbia University - Department of Psychology ( email )

406 Schermerhorn Hall
1190 Amsterdam Avenue, Mail Code 5501
New York, NY 10027
United States

David Krantz

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Elke U. Weber

Princeton University - Department of Psychology

Green Hall
Princeton, NJ 08540
United States

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