Procedures for eliciting time preferences

David Freeman; Paola Manzini; Marco Mariotti; Luigi Mittone

Procedures for eliciting time preferences

David Freeman, Paola Manzini, Marco Mariotti, Luigi Mittone

Research output: Working paper › Discussion paper

Abstract

We study three procedures to elicit attitudes towards delayed payments: the Becker-DeGroot-Marschak procedure; the second price auction; and the multiple price list. The payment mechanisms associated with these methods are widely considered as incentive compatible, thus if preferences satisfy Procedure Invariance, which is also widely (and often implicitly) assumed, they should yield identical time preference distributions. We find instead that the monetary discount rates elicited using the Becker-DeGroot-Marschak procedure are significantly lower than those elicited with a multiple price list. We show that the behavior we observe is consistent with an existing psychological explanation of preference reversals.

Original language	English
Place of Publication	St Andrews
Publisher	University of St Andrews
Pages	1-29
Number of pages	29
Publication status	Published - 20 Oct 2015

Publication series

Name	School of Economics & Finance Discussion Paper
Publisher	University of St Andrews
No.	1513
ISSN (Print)	0962-4031
ISSN (Electronic)	2055-303X

Keywords

Time preferences
elicitation methods
Becker-DeGroot-Marschak procedure
auctions
multiple price list

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title = "Procedures for eliciting time preferences",

abstract = "We study three procedures to elicit attitudes towards delayed payments: the Becker-DeGroot-Marschak procedure; the second price auction; and the multiple price list. The payment mechanisms associated with these methods are widely considered as incentive compatible, thus if preferences satisfy Procedure Invariance, which is also widely (and often implicitly) assumed, they should yield identical time preference distributions. We find instead that the monetary discount rates elicited using the Becker-DeGroot-Marschak procedure are significantly lower than those elicited with a multiple price list. We show that the behavior we observe is consistent with an existing psychological explanation of preference reversals.",

keywords = "Time preferences, elicitation methods, Becker-DeGroot-Marschak procedure, auctions, multiple price list",

author = "David Freeman and Paola Manzini and Marco Mariotti and Luigi Mittone",

note = "Precursors of this paper were originally circulated under the titles {\textquoteleft}The elicitation of time preferences{\textquoteright} and {\textquoteleft}A Case of Framing Effects: The Elicitation of Time Preferences{\textquoteright} -these received partial financial support through the ESRC grant RES-000-22-1636 (Manzini and Mariotti). Further funding was provided by CEEL. ",

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AU - Mariotti, Marco

AU - Mittone, Luigi

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PY - 2015/10/20

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N2 - We study three procedures to elicit attitudes towards delayed payments: the Becker-DeGroot-Marschak procedure; the second price auction; and the multiple price list. The payment mechanisms associated with these methods are widely considered as incentive compatible, thus if preferences satisfy Procedure Invariance, which is also widely (and often implicitly) assumed, they should yield identical time preference distributions. We find instead that the monetary discount rates elicited using the Becker-DeGroot-Marschak procedure are significantly lower than those elicited with a multiple price list. We show that the behavior we observe is consistent with an existing psychological explanation of preference reversals.

AB - We study three procedures to elicit attitudes towards delayed payments: the Becker-DeGroot-Marschak procedure; the second price auction; and the multiple price list. The payment mechanisms associated with these methods are widely considered as incentive compatible, thus if preferences satisfy Procedure Invariance, which is also widely (and often implicitly) assumed, they should yield identical time preference distributions. We find instead that the monetary discount rates elicited using the Becker-DeGroot-Marschak procedure are significantly lower than those elicited with a multiple price list. We show that the behavior we observe is consistent with an existing psychological explanation of preference reversals.

KW - Time preferences

KW - elicitation methods

KW - Becker-DeGroot-Marschak procedure

KW - auctions

KW - multiple price list

UR - https://ideas.repec.org/p/san/wpecon/1513.html

M3 - Discussion paper

T3 - School of Economics & Finance Discussion Paper

SP - 1

EP - 29

BT - Procedures for eliciting time preferences

PB - University of St Andrews

CY - St Andrews

ER -

Procedures for eliciting time preferences

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