An Empirical Investigation of Quasi-hyperbolic Discounting

Abstract

In contrast to the extensive experimental evidence that supports the hypothesis that many people exhibit myopia when planning for the future, very little work has been done to test the hypothesis on field data. This study reports estimates for a structural model of decision making calculated on survey data for a broad cross-section of the UK population. Myopia is identified by focussing upon behavioural margins over pensions and employment in context of an experience effect on wages. The results obtained support the conjecture that allowing for quasi-hyperbolic discounting obtains a better fit of the model to survey data; the short-run discount factor is estimated at 0.825, is significantly less than the long-run discount factor of 0.976. 1

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