Econometrica: May 2008, Volume 76, Issue 3

Eliciting Risk and Time Preferences
p. 583-618

Steffen Andersen, Glenn W. Harrison, Morten I. Lau, E. Elisabet Rutström

We design experiments to jointly elicit risk and time preferences for the adult Danish population. Since subjects are generally risk averse, we find that joint elicitation provides estimates of discount rates that are significantly lower than those found in previous studies and more in line with what would be considered as reasonable rates. The statistical specification relies on a theoretical framework that involves a latent trade‐off between long‐run optimization and short‐run temptation. Estimation of this specification is undertaken using structural, maximum likelihood methods. Our main results based on exponential discounting are robust to alternative specifications such as hyperbolic discounting. These results have direct implications for attempts to elicit time preferences, as well as debates over the appropriate domain of the utility function when characterizing risk aversion and time consistency.

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Supplemental Material

Supplement to "Eliciting Risk and Time Preferences"

Appendix A presents the survey questions asked of subjects in Parts I and IV of the experiment, as well as the data coding for responses.  These are all translations of the original Danish, available on request.  Appendix B: Sample Design.  Appendix C: Experimenter Script. Appendix D: Data and Statistical Analysis.  Appendix E: Theoretical Notes.

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Supplement to "Eliciting Risk and Time Preferences"

The statistical modeling is implemented using version 10.0 of Stata.  Contains all data files and Statacommand files.

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