Dynamic Consistency in Denmark: A Longitudinal Field Experiment

UCF Economics Working Paper No. 05-02

60 Pages Posted: 20 Apr 2005

See all articles by Glenn W. Harrison

Glenn W. Harrison

Georgia State University - J. Mack Robinson College of Business

Morten I. Lau

Durham Business School

E. Elisabet Rutström

University of Central Florida - College of Business Administration

Date Written: February 2005

Abstract

Evidence that individuals have dynamically consistent preferences is usually generated by studying the discount rates of the individual over different horizons, but where those rates are elicited at a single point in time. If these elicited discount rates vary by horizon, the individual is typically claimed to have preferences that imply a dynamic inconsistency, although this inference requires additional assumptions such as intertemporal separability. However, what one really wants to know is if the same subject has the same discount rate function when that individual is asked at a later point in time. Such panel tests then require that one allow for possible changes in the states of nature that the subject faces, since they may confound any in-sample comparisons of discount rate functions at different points in time. We report the results of a large-scale panel experiment undertaken in the field that allows us to examine this issue. In June 2003, we elicited subjective discount rates from 253 subjects, representative of the adult Danish population. Between September 2003 and November 2004, we re-visited 97 of these subjects and repeated these tasks. In each visit, we also elicited information on their individual characteristics, as well as their expectations about the state of their own economic situation and macroeconomic variables. We find evidence in favor of dynamic consistency.

Keywords: Discounting, dynamic consistemcy, field experiments

JEL Classification: D91, C93

Suggested Citation

Harrison, Glenn William and Lau, Morten Igel and Rutstrom, Elisabet, Dynamic Consistency in Denmark: A Longitudinal Field Experiment (February 2005). UCF Economics Working Paper No. 05-02, Available at SSRN: https://ssrn.com/abstract=698483 or http://dx.doi.org/10.2139/ssrn.698483

Glenn William Harrison (Contact Author)

Georgia State University - J. Mack Robinson College of Business ( email )

P.O. Box 4050
Atlanta, GA 30303-3083
United States
407-489-3088 (Phone)
253-830-7636 (Fax)

HOME PAGE: http://www.cear.gsu.edu/

Morten Igel Lau

Durham Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Elisabet Rutstrom

University of Central Florida - College of Business Administration ( email )

PO Box 161400
Orlando, FL 32816
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
136
Abstract Views
1,192
rank
230,843
PlumX Metrics