Time Preference: Experiments and Foundations

Abstract

In order to elicit discount functions, experiments commonly rely on money-time separability and curvature assumptions on the underlying discounted utility representation. This paper presents a procedure for elicitation that dispenses with both sets of assumptions. It is based on a general theorem that characterizes the set of discount functions and utility indices compatible with any regular preference (monotone weak order) over dated rewards. The theorem expresses the observation that the behavioral meaning of discounting lies in behavior obtained by …xing the money dimension and varying only the time dimension.

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