Procedures for Eliciting Time Preferences

31 Pages Posted: 4 Apr 2016

See all articles by David Freeman

David Freeman

Simon Fraser University (SFU)

Paola Manzini

University of St. Andrews - School of Economics and Finance; Institute for the Study of Labor (IZA)

Marco Mariotti

University of London - School of Economics and Finance

Luigi Mittone

University of Trento - Department of Economics and Management

Abstract

We study three procedures to elicit attitudes towards delayed payments: the Becker-DeGroot-Marschak procedure; the second price auction; and the multiple price list. The payment mechanisms associated with these methods are widely considered as incentive compatible, thus if preferences satisfy Procedure Invariance, which is also widely (and often implicitly) assumed, they should yield identical time preference distributions. We find instead that the monetary discount rates elicited using the Becker-DeGroot-Marschak procedure are significantly lower than those elicited with a multiple price list. We show that the behavior we observe is consistent with an existing psychological explanation of preference reversals.

Keywords: time preferences, elicitation methods, Becker-DeGroot-Marschak procedure, auctions, multiple price list

JEL Classification: C91, D9

Suggested Citation

Freeman, David and Manzini, Paola and Mariotti, Marco and Mittone, Luigi, Procedures for Eliciting Time Preferences. IZA Discussion Paper No. 9857. Available at SSRN: https://ssrn.com/abstract=2757967

David Freeman (Contact Author)

Simon Fraser University (SFU) ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

Paola Manzini

University of St. Andrews - School of Economics and Finance ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

HOME PAGE: http://www.st-andrews.ac.uk/~pm210/

Institute for the Study of Labor (IZA)

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

Marco Mariotti

University of London - School of Economics and Finance ( email )

Mile End Road
London, E1 4NS
United Kingdom

Luigi Mittone

University of Trento - Department of Economics and Management ( email )

Via Inama 5
Trento, I-38100
Italy

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