43 Pages Posted: 3 Nov 2016
Date Written: October 31, 2016
Using a unique field experiment from Canada, we estimate individual preference over risk and time and show considerable heterogeneity in both dimensions and relatively stable distributions across our various specifications, which include hyperbolic, quasi-hyperbolic discounting as well as subjective failure probability over future payments. We investigate the prediction power (transportability) of the estimated preference parameters when used to explain the take-up decision of higher education grants where financial stakes are approximately seven to fifty times larger than the cash transfers used to elicit preferences. We find that both long-run discount factors and subjective payment failure risk parameters have a high degree of transportability across tasks, while parameters characterizing short-run discount preferences are irrelevant when considering higher-stakes decisions.
Keywords: Discounting, Risk Aversion, Time Inconsistency, Transportability
JEL Classification: C91, D12 ,D81
Suggested Citation: Suggested Citation
Belzil, Christian and Sidibe, Modibo, Internal and External Validity of Experimental Risk and Time Preferences (October 31, 2016). Economic Research Initiatives at Duke (ERID) Working Paper No. 237. Available at SSRN: https://ssrn.com/abstract=2863350