36 Pages Posted: 12 Jun 2014
Date Written: June 11, 2014
Consider an experiment in which subjects are asked to choose between pairs consisting of a monetary payment and a time-delay at which the payment is delivered. Given a finite set of observations, under what conditions the choices of an individual agent can be rationalised by a discounted utility function? We develop an axiomatic characterisation of time-preference with various forms of discounting, including weakly present-biased, quasi-hyperbolic, and exponential, and determine the testable restrictions for each specification. Moreover, we discuss identification issues which may arise in this class of experiments.
Keywords: revealed preference, testable restrictions, rationalisation, time-preference, discounted utility
JEL Classification: C14, C60, C61, D11, D12
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