Can Hypothetical Time Discounting Rates Predict Actual Behaviour: Evidence from a Randomized Experiment

37 Pages Posted: 6 Dec 2016 Last revised: 5 Mar 2017

See all articles by Jacopo Bonan

Jacopo Bonan

Polytechnic University of Milan - Politecnico di Milano, Department of Management, Economics and Industrial Engineering, Students; RFF-CMCC European Institute on Economics and the Environment

Philippe LeMay-Boucher

Heriot-Watt University

Douglas Scott

University of Nottingham

Multiple version iconThere are 2 versions of this paper

Date Written: December 6, 2016

Abstract

This paper estimates time preference parameters using commonly-applied methodologies, with the aim of investigating the link between these measures and actual economic behaviour. An experiment was conducted in the city of Thies, in Senegal, using the unique reference numbers of banknotes as a means of determining an individual’s willingness to save money. The findings of this experiment provide an innovative comparison between real choices, and choices made in the presence of hypothetical rewards. Our research indicates that individuals display a far greater degree of patience, when the possibility of genuine financial gain is made available to them. Our results show that hypothetical time preferences parameters are poor predictors of actual behaviour, prompting questions over the validity of commonly used measurements.

Keywords: Time Preferences, Randomized Experiment, Senegal

JEL Classification: D01, D91, C93, O1

Suggested Citation

Bonan, Jacopo and LeMay-Boucher, Philippe and Scott, Douglas, Can Hypothetical Time Discounting Rates Predict Actual Behaviour: Evidence from a Randomized Experiment (December 6, 2016). FEEM Working Paper No. 74.2016, Available at SSRN: https://ssrn.com/abstract=2881222 or http://dx.doi.org/10.2139/ssrn.2881222

Jacopo Bonan (Contact Author)

Polytechnic University of Milan - Politecnico di Milano, Department of Management, Economics and Industrial Engineering, Students ( email )

Via Lambruschini 4C - building 26/A
Milano, 20156
United States

RFF-CMCC European Institute on Economics and the Environment ( email )

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Via Bergognone 34
Milan, 20144
Italy

Philippe LeMay-Boucher

Heriot-Watt University ( email )

Riccarton
Edinburgh EH14 4AS, Scotland EH14 1AS
United Kingdom

Douglas Scott

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

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