The Impacts of Elicitation Mechanism and Reward Size on Estimated Rates of Time Preference

30 Pages Posted: 20 Mar 2014 Last revised: 16 Aug 2014

Date Written: August 15, 2014

Abstract

We run experiments with real monetary rewards ranging from $10 to $500 to estimate rates of time preference and test for hyperbolic discounting. Individuals become more patient with increasing reward sizes, which is consistent with future transaction costs. Subjects are divided between two different elicitation mechanisms that should both theoretically provide an incentive for participants to reveal their true time preferences. We find evidence of present-bias in the data from the BDM mechanism but no present-bias from a second-price-sealed-bid mechanism. Accordingly, researchers should interpret results from experiments with small reward sizes and using one specific elicitation mechanism cautiously.

Keywords: hyperbolic discounting, intertemporal choice, auctions, experiments

JEL Classification: D90, C91, D44

Suggested Citation

Meyer, Andrew, The Impacts of Elicitation Mechanism and Reward Size on Estimated Rates of Time Preference (August 15, 2014). Available at SSRN: https://ssrn.com/abstract=2410914 or http://dx.doi.org/10.2139/ssrn.2410914

Andrew Meyer (Contact Author)

Marquette University ( email )

1225 W. Wisconsin Avenue
Milwaukee, WI 53233
United States
414-288-5489 (Phone)

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