IZA Paper: Interpreting Time Horizon Effects in Inter-Temporal Choice

Interpreting Time Horizon Effects in Inter-Temporal Choice

Thomas Dohmen
ROA, Maastricht University,
DIW and IZA

Armin Falk
University of Bonn,
CEPR and IZA

David Huffman
Swarthmore College
and IZA

Uwe Sunde
University of St. Gallen,
CEPR and IZA

Discussion Paper No. 6385
February 2012

We compare different designs that have been used to test for an impact of time horizon on discounting, using real incentives and two representative data sets. With the most commonly used type of design we replicate the typical finding of declining (hyperbolic) discounting, but with other designs find constant or increasing discounting. As a whole, the data are not consistent with any of these usual candidate discounting assumptions, and they also imply a violation of transitivity. The results have implications for interpreting previous evidence, and pose an important puzzle for understanding inter-temporal choice.

JEL Classification: D01, D90, D03, E21

Keywords: time preference, hyperbolic discounting, self-control, dynamic inconsistency,
intransitivity

Impatience and Uncertainty: Experimental Decisions Predict Adolescents’ Field Behavior

Impatience and Uncertainty: Experimental Decisions Predict Adolescents’ Field Behavior

Matthias Sutter
University of Innsbruck,
University of Gothenburg and IZA
Martin G. Kocher
University of Munich
Daniela Rützler
University of Innsbruck
Stefan T. Trautmann
University of Tilburg

ABSTRACT
Impatience and Uncertainty:
Experimental Decisions Predict Adolescents’ Field Behavior*

We study risk attitudes, ambiguity attitudes, and time preferences of 661 children and
adolescents, aged ten to eighteen years, in an incentivized experiment. We relate experimental choices to field behavior. Experimental measures of impatience are found to be significant predictors of health related field behavior and saving decisions. In particular, more impatient children and adolescents are more likely to spend money on alcohol and cigarettes, have a higher body mass index (BMI) and are less likely to save money. Experimental measures for risk and ambiguity attitudes are only weak predictors of field behavior.

JEL Classification: C91, C93, D81, D90

Keywords: experiments with children and adolescents, risk, ambiguity, time preferences,
health status, savings, external validity, field behavior

Social Security: Collect now or later

An interesting article in the New York Times about the potential financial benefits of waiting before starting to claim your payments.

link here

Age & time discounting

This seems like an obvious question but one I had never thought of before: does time discounting vary with age? If yes, could this explain time inconsistent behaviour and can we see any neural correlates of this? Introspection suggests that one discounts more as one ages. After all, why put off to tomorrow when it is increasingly likely that there will not be a tomorrow or, as Dylan Thomas put it, "Do not go gently into that good night"?

For some evidence: Time discounting over the lifespan, D Read & N.L. Read. Organizational Behavior and Human Decision Processes Volume 94, Issue 1, May 2004, Pages 22-32

Frederick on Time Discounting

Have the Frederick lecture on in the background as I am working here. Given the interest of people who read this blog, I think it deserves to be bumped up. I particularly like the idea of what would happen if drinking gave you an immediate hangover but made you feel great in the morning!

http://mitworld.mit.edu/video/477