Time preferences and risk aversion: tests on domain differences

The design and evaluation of environmental policy requires the incorporation of time and risk elements as many environmental outcomes extend over long time periods and involve a large degree of uncertainty. Understanding how individuals discount and evaluate risks with respect to environmental outcomes is a prime component in designing effective environmental policy to address issues of environmental sustainability, such as climate change. Our objective in this study is to investigate whether subjects' time preferences and risk aversion across the monetary domain and the environmental domain differ. Crucially, our experimental design is incentivized: in the monetary domain, time preferences and risk aversion are elicited with real monetary payoffs, whereas in the environmental domain, we elicit time preferences and risk aversion using real (bee-friendly) plants. We find that subjects' time preferences are not significantly different across the monetary and environmental domains. In contrast, subjects' risk aversion is significantly different across the two domains. More specifically, subjects (men and women) exhibit a higher degree of risk aversion in the environmental domain relative to the monetary domain. Finally, we corroborate earlier results, which document that women are more risk averse than men in the monetary domain. We show this finding to, also, hold in the environmental domain

Can Hypothetical Time Discounting Rates Predict Actual Behaviour: Evidence from a Randomized Experiment

This paper estimates time preference parameters using commonly-applied methodologies, with the aim of investigating the link between these measures and actual economic behaviour. An experiment was conducted in the city of Thies, in Senegal, using the unique reference numbers of banknotes as a means of determining an individual’s willingness to save money. The findings of this experiment provide an innovative comparison between real choices, and choices made in the presence of hypothetical rewards. Our research indicates that individuals display a far greater degree of patience, when the possibility of genuine financial gain is made available to them. Our results show that hypothetical time preferences parameters are poor predictors of actual behaviour, prompting questions over the validity of commonly used measurements

The impact of intrinsic and extrinsic features on delay discounting

International audienceDelay discounting refers to the tendency of people to evaluate immediate rewards as being more valuable than those that are distant in time. Several models explain this phenomenon by a set of intrinsic and extrinsic features. Intrinsic features are related to the inherent traits and neurological conditions of the individual, whereas extrinsic features are related to the characteristics of the reward. In this study, we refer to extraversion and attention-deficit/hyperactivity disorder symptoms (attention and hyperactivity-impulsivity) as intrinsic features, and to fungibility, perishability, and magnitude of the reward as extrinsic features. Whereas there is a known main effect to these intrinsic and extrinsic features, the current research examines their additive and interactive contributions to delay discounting. A total of 222 participants filled out an online questionnaire measuring intrinsic features and presenting decision tasks with different types of rewards. The scores of the intrinsic variables and the delay discounting rate for each reward were calculated and analyzed. The results replicated previous findings showing main effects of hyperactivity, fungibility, perishability, and magnitude. They also provided new findings on an interaction between fungibility-perishability and hyperactivity—the effect of hyperactivity on delay discounting was larger when the rewards were fungible and nonperishable than when the rewards were perishable and nonfungible. This interaction has practical implications that can help in moderating delay discounting in clinical treatments of impulsivity as well as in constructing efficient economic models for consumers

Discounting Health and Money: New Evidence Using A More Robust Method

International audienceThis study compares discounting for money and health in a field study. We applied the direct method, which measures discounting independent of utility, in a representative French sample, interviewed at home by professional interviewers. We found more discounting for money than for health. The median discount rates (6.5% for money and 2.2 % for health) were close to market interest rates suggesting that the direct method solves the puzzle of unrealistically high discount rates typically observed in applied economics. Constant discounting fitted the data better than hyperbolic discounting. The substantial individual heterogeneity in discounting could be explained by age and occupation