Eliciting Individual-Specific Discount Rates

University of Oregon Economics Working Paper No. 2003-10

49 Pages Posted: 4 Nov 2003

See all articles by Trudy Ann Cameron

Trudy Ann Cameron

University of Oregon - Department of Economics

Geoffrey R. Gerdes

Board of Governors of the Federal Reserve System

Date Written: January 1, 2003

Abstract

Longstanding debate over the appropriate social discount rate for public projects stems from our lack of knowledge about how individual discount rates vary across people and across choice contexts. Using a sample of roughly 15,000 choices by over 2000 individuals, we estimate utility theoretic models concerning private tradeoffs involving money over time that reveal individual specific discount rates. We control for experimentally differentiated choice scenarios, sociodemographic heterogeneity, and elicitation formats, and complex forms of heteroscedasticity. Statistically significant heterogeneity in discount rates is quantified for both an exponential discounting model and a competing hyperbolic model, but neither specification clearly dominates.

JEL Classification: D91, H4, C25, C35

Suggested Citation

Cameron, Trudy Ann and Gerdes, Geoffrey R., Eliciting Individual-Specific Discount Rates (January 1, 2003). University of Oregon Economics Working Paper No. 2003-10, Available at SSRN: https://ssrn.com/abstract=436524 or http://dx.doi.org/10.2139/ssrn.436524

Trudy Ann Cameron (Contact Author)

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

Geoffrey R. Gerdes

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-872-4953 (Phone)
202-872-7533 (Fax)

HOME PAGE: http://www.federalreserve.gov/research/staff/gerdesgeoffreyr.htm