Measuring Time Preferences

69 Pages Posted: 1 Aug 2016

See all articles by Jonathan D. Cohen

Jonathan D. Cohen

Princeton University - Department of Psychology

Keith M. Marzilli Ericson

Boston University - Markets, Public Policy, and Law; National Bureau of Economic Research (NBER)

David Laibson

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

John Myles White

Princeton University; Microsoft Corporation - Microsoft Research - Redmond

Date Written: July 2016

Abstract

We review research that measures time preferences—i.e., preferences over intertemporal tradeoffs. We distinguish between studies using financial flows, which we call “money earlier or later” (MEL) decisions and studies that use time-dated consumption/effort. Under different structural models, we show how to translate what MEL experiments directly measure (required rates of return for financial flows) into a discount function over utils. We summarize empirical regularities found in MEL studies and the predictive power of those studies. We explain why MEL choices are driven in part by some factors that are distinct from underlying time preferences.

Suggested Citation

Cohen, Jonathan D. and Ericson, Keith M. Marzilli and Laibson, David I. and White, John Myles, Measuring Time Preferences (July 2016). NBER Working Paper No. w22455. Available at SSRN: https://ssrn.com/abstract=2816729

Jonathan D. Cohen (Contact Author)

Princeton University - Department of Psychology ( email )

Green Hall
Princeton, NJ 08540
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Keith M. Marzilli Ericson

Boston University - Markets, Public Policy, and Law ( email )

Boston, MA
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National Bureau of Economic Research (NBER) ( email )

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David I. Laibson

Harvard University - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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John Myles White

Princeton University ( email )

Green Hall
Princeton, NJ 08540
United States

Microsoft Corporation - Microsoft Research - Redmond ( email )

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Redmond, WA
United States

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