The Performance of Time-Preference and Risk-Preference Measures in Surveys

89 Pages Posted: 5 May 2018 Last revised: 20 Oct 2020

See all articles by Joshua Tasoff

Joshua Tasoff

Claremont Colleges - Claremont Graduate University

Wenjie Zhang

Claremont Colleges - School of Politics and Economics

Date Written: October 19, 2020

Abstract

Time preferences and risk preferences play an important role in a wide range of behavior, including financial decisions, entrepreneurship, and the proper incentivizing of agents. Numerous methods have been developed to measure these preferences hypothetically in surveys but they have yielded inconsistent results. We analyze a panel data set in which subjects have collectively answered more than 400 surveys including 15 time-preference and 36 risk-preference elicitations. We evaluate the performance of these measures using the criteria of (1) ability to predict economically important behavior and (2) distinctness from other observables. We find substantial heterogeneity in the predictiveness of the measures. The best performing measure for time-preference is a titration method, in which a sequence of adaptive binary choice questions narrows in on a subject’s indifference point, and for risk-preference it is a self-report measure of risk aversion. Using factor analysis, we find that time preferences are well explained by a single factor but risk preferences load on multiple factors. However, the first factor loads almost entirely on self-reported risk-preference measures and this factor explains much of the variation. The evidence can help inform researchers about which elicitation methods to include in their surveys.

Keywords: Time Preferences, Risk Preferences, Surveys, Elicitation Method

JEL Classification: C83, D01, D12, D90

Suggested Citation

Tasoff, Joshua and Zhang, Wenjie, The Performance of Time-Preference and Risk-Preference Measures in Surveys (October 19, 2020). Available at SSRN: https://ssrn.com/abstract=3165792 or http://dx.doi.org/10.2139/ssrn.3165792

Joshua Tasoff (Contact Author)

Claremont Colleges - Claremont Graduate University ( email )

150 E. Tenth Street
Claremont, CA 91711
United States

HOME PAGE: http://sites.cgu.edu/tasoffj/

Wenjie Zhang

Claremont Colleges - School of Politics and Economics ( email )

Claremont, CA 91711
United States

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