The Performance of Time-Preference and Risk-Preference Measures in Surveys
67 Pages Posted: 5 May 2018 Last revised: 29 Jul 2018
Date Written: July 17, 2018
We analyze a panel data set in which subjects have collectively answered over 400 surveys including over a dozen time-preference and risk-preference elicitations each. We evaluate the performance of these measures using the criteria of within-person stability over time, ability to predict economically important behavior, and distinctness from other observables. We characterize seven facts regarding the measures. First, we find stability across methods varies greatly. Second, within person variation is mostly unexplained by economic observables. Third, there is substantial heterogeneity in the predictiveness of the measures. Fourth, the best performing measure for time- preference is a titration method and for risk-preference it is two Likert measures about general risk aversion and financial risk aversion. Fifth, we find that time preferences are well explained by a single factor. Sixth, risk preferences, as measured using psychology- style Likert measures, load on a single factor that explains much of the variation, but the economic measures load on other ancillary factors. Seventh, the association of time and risk preferences on economic behaviors is unmediated by other individual characteristics such as cognitive ability.
Keywords: Time Preferences, Risk Preferences, Surveys, Elicitation Method
JEL Classification: C83, D01, D12, D90
Suggested Citation: Suggested Citation