How to Measure Discount Rates? An Experimental Comparison of Three Methods
42 Pages Posted: 19 Nov 2011
Date Written: November 1, 2011
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.
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