Exponential or Hyperbolic? Identifying and Testing the Predictive Power of Time Preference Over Unhealthy Behaviours
32 Pages Posted: 16 Aug 2016 Last revised: 7 Jan 2017
Date Written: August 1, 2016
It is crucial to more thoroughly understand discounting behaviour because it has important implications for designing interventions with financial incentives for behavioural change. This means examining discounting functional forms as well as discount rates and establishing their impacts across multiple as well as singular unhealthy behaviours. We provide a parametric specification test on the basis of a series of field experiments among 176 civil servants in Belfast, Northern Ireland. The results suggested that hyperbolic discounting performs better than exponential discounting and that the hyperbolic form which decomposes hyperbolic discounting into impatience and time-inconsistent discounting had the best fit. It is further revealed that obese smokers and non-obese smokers were more impatient with respect to financial rewards than the baseline group of non-obese non-smokers, whereas obese non-smokers did not show different discount rates than the baseline group. No correlation was found between the time-inconsistency nature of discounting and smoking and obesity.
Keywords: Hyperbolic discounting; Exponential discounting; Unhealthy behaviour; Economic field experiment
JEL Classification: C93 D90 I12
Suggested Citation: Suggested Citation