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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/49497
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| Title: | | A flexible test for present bias and time preferences using land-lease contracts  |
| Authors: | | Gautier, Pieter A. van Vuuren, Aico |
| Issue Date: | | 2011 |
| Series/Report no.: | | CESifo working paper: Behavioural Economics 3549 |
| Abstract: | | When agents have present bias, they discount more between now and the next period than between period t (> 1) and t + 1. How fast the future discount rate (evaluated today) decays is an empirical question. We show that the discount function can be non-parametrically identified with contracts that specify payments that take place at various points in time in the future and which are traded and priced in a competitive market. We use a unique land lease-contract data set for Amsterdam, which has the above properties, to test for present bias in a flexible way. We find no evidence for present bias in this market. Even though we allow for a general-hyperbolic specification (which has exponential discounting as a special case), our estimates converge to an exponential discount function with a corresponding discount rate (in our baseline specification) of 8 %. |
| Subjects: | | present bias hyperbolic discounting discount rate hedonic estimation |
| JEL: | | D03 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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