Abstract
It is standard practice in economic evaluation and in any economic analysis of future events to assume the discounted utility model on the part of economic agents. This paper compares the discounted utility model with three hyperbolic discounting models with respect to private and social financial benefits. The discounting models are fitted using non-linear regression techniques to data collected from the general public. Regression analysis is then used to test the theoretical validity of the models. The main test is whether the period of years for which the benefit is to be delayed is a statistically significant predictor of the respective values of the discounted utility model and the three hyperbolic discounting models. This tests whether these discounting models are satisfactory representations of the individuals' intertemporal preferences. The results show that there is evidence in favour of hyperbolic discounting models over the discounted utility model. There were not any statistically significant differences in the discounting models fitted for the private and social financial benefits. The regression results were very similar for the private and social financial benefits. (C) 2000 Elsevier Science B.V. All rights reserved. PsycINFO classification: 2340 JEL classification: D90.
| Original language | English |
|---|---|
| Pages (from-to) | 191-205 |
| Number of pages | 15 |
| Journal | Journal of Economic Psychology |
| Volume | 21 |
| Publication status | Published - 2000 |
Keywords
- time preference
- hyperbolic discounting
- DELAYED REWARDS
- PREFERENCE REVERSALS
- CHOICE
- RATES
- DECISIONS
- LIVES
Cite this
Valuing future private and social benefits: The discounted utility model versus hyperbolic discounting models. / Cairns, J ; Pol van der, M .
In: Journal of Economic Psychology, Vol. 21, 2000, p. 191-205.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Valuing future private and social benefits: The discounted utility model versus hyperbolic discounting models
AU - Cairns, J
AU - Pol van der, M
PY - 2000
Y1 - 2000
N2 - It is standard practice in economic evaluation and in any economic analysis of future events to assume the discounted utility model on the part of economic agents. This paper compares the discounted utility model with three hyperbolic discounting models with respect to private and social financial benefits. The discounting models are fitted using non-linear regression techniques to data collected from the general public. Regression analysis is then used to test the theoretical validity of the models. The main test is whether the period of years for which the benefit is to be delayed is a statistically significant predictor of the respective values of the discounted utility model and the three hyperbolic discounting models. This tests whether these discounting models are satisfactory representations of the individuals' intertemporal preferences. The results show that there is evidence in favour of hyperbolic discounting models over the discounted utility model. There were not any statistically significant differences in the discounting models fitted for the private and social financial benefits. The regression results were very similar for the private and social financial benefits. (C) 2000 Elsevier Science B.V. All rights reserved. PsycINFO classification: 2340 JEL classification: D90.
AB - It is standard practice in economic evaluation and in any economic analysis of future events to assume the discounted utility model on the part of economic agents. This paper compares the discounted utility model with three hyperbolic discounting models with respect to private and social financial benefits. The discounting models are fitted using non-linear regression techniques to data collected from the general public. Regression analysis is then used to test the theoretical validity of the models. The main test is whether the period of years for which the benefit is to be delayed is a statistically significant predictor of the respective values of the discounted utility model and the three hyperbolic discounting models. This tests whether these discounting models are satisfactory representations of the individuals' intertemporal preferences. The results show that there is evidence in favour of hyperbolic discounting models over the discounted utility model. There were not any statistically significant differences in the discounting models fitted for the private and social financial benefits. The regression results were very similar for the private and social financial benefits. (C) 2000 Elsevier Science B.V. All rights reserved. PsycINFO classification: 2340 JEL classification: D90.
KW - time preference
KW - hyperbolic discounting
KW - DELAYED REWARDS
KW - PREFERENCE REVERSALS
KW - CHOICE
KW - RATES
KW - DECISIONS
KW - LIVES
M3 - Article
VL - 21
SP - 191
EP - 205
JO - Journal of Economic Psychology
JF - Journal of Economic Psychology
SN - 0167-4870
ER -