Measuring Time and Risk Preferences: Reliability, Stability, Domain Specificity

32 Pages Posted: 29 Jul 2013

See all articles by Eva Woelbert

Eva Woelbert

Maastricht University

Arno Riedl

Maastricht University; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); Netspar

Multiple version iconThere are 2 versions of this paper

Date Written: July 29, 2013

Abstract

To accurately predict behavior economists need reliable measures of individual time preferences and attitudes toward risk and typically need to assume stability of these characteristics over time and across decision domains. We test the reliability of two choice tasks for eliciting discount rates, risk aversion, and probability weighting and assess the stability of these characteristics over time and across situations. We find high reliability and that individual characteristics are remarkably stable over time. The estimated parameters correlate well with self-reported decisions in financial domains, but are largely uncorrelated with decisions in other important life domains involving intertemporal trade-offs and risk.

Keywords: time discounting, risk aversion, probability weighting, reliability, stability, domain specificity, experiment

JEL Classification: C180, C910, D030, D800, D900

Suggested Citation

Woelbert, Eva and Riedl, Arno M., Measuring Time and Risk Preferences: Reliability, Stability, Domain Specificity (July 29, 2013). CESifo Working Paper Series No. 4339, Available at SSRN: https://ssrn.com/abstract=2302494 or http://dx.doi.org/10.2139/ssrn.2302494

Eva Woelbert

Maastricht University ( email )

P.O. Box 616
Maastricht, Limburg 6200MD
Netherlands

Arno M. Riedl (Contact Author)

Maastricht University ( email )

Department of Microeconomics & Public Economics
P.O. Box 616
Maastricht, 6200 MD
Netherlands

HOME PAGE: http://www.arnoriedl.com

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

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