Measuring time preferences: A comparison of experimental methods

Abstract

Eliciting time preferences has become an important component of both laboratory and field experiments, yet there is no consensus as how to best measure discounting. We examine the predictive validity of two recent, simple, easily administered, and individually successful elicitation tools: Convex Time Budgets (CTB) and Double Multiple Price Lists (DMPL). Using similar methods, the CTB and DMPL are compared using within-and out-of-sample predictions. While each perform equally well within sample, the CTB significantly outperforms the DMPL on out-of-sample measures.

No need for more time: Intertemporal allocation decisions under time pressure

“…We estimated all parameters via NLS for simplicity. In line with related papers (Andersen et al, 2008;Andreoni et al, 2015;Andreoni and Sprenger, 2012;Lührmann et al, 2015), we find a high level of heterogeneity across subjects for all parameters of…”

“…However, this can be considered as a minor problem for our subsequent analysis due to the fact that experimental data provides vast evidence for the majority of subjects being risk averse for high and close to risk neutral, but still risk averse, for lower stakes Laury, 2002, 2005). Additionally, even though estimating a non-linear estimation equation does not account for the interval nature of the data, previous papers have shown that estimating an ICT regression model performed as a robustness check for the NLS regression produces equivalent 9 results (Andreoni et al, 2015;Lührmann et al, 2015). Moreover, the estimate for utility function curvature ↵ cannot be separately identified from the stochastic disturbance term ⌧ as explained below.…”

“…The elicitation method used in the experimental task are Convex Time Budgets (CTB; Andreoni et al, 2015;Andreoni and Sprenger, 2012). Subjects were faced with 24 decisions in each condition, where each decision implied choosing one option out of a set of six di↵erent allocations of a given future value budget of 7.50 e between an earlier and later date in time.…”

“…Another 29 subjects were excluded due to multiple switching. Multiple switching is defined as allocating a lower fraction of the budget to the earlier date at a higher price ratio compared to a lower price ratio and can be interpreted as an extreme form of non-monotonic demand (Andreoni et al, 2015;Andreoni and Sprenger, 2012). Since our theoretical model does not account for this kind of non-standard preferences and violations of the law of demand, these subjects do not enter this analysis.…”

Procedures for eliciting time preferences

“…Incentivized work on methods for measuring time preferences has studied alternative ways to jointly measure a person's discount rate and utility function curvature (e.g. Andreoni and Sprenger (2012), Andreoni et al (2015), and Laury et al (2012)), but has ignored the possibility that the elicitation procedure used might a↵ect inferences about discounting even when restricted to the domain of dated rewards.…”