A Flexible Test for Present Bias and Time Preferences using Land-Lease Contracts

Arbeitspapier

When agents have present bias, they discount more between now and thenext period than between period t (> 1) and t + 1. How fast the future discount rate (evaluated today) decays is an empirical question. Weshow that the discount function can be non-parametrically identified withcontracts that specify payments that take place at various points in timein the future and which are traded and priced in a competitive market.We use a unique land lease-contract data set for Amsterdam, which hasthe above properties, to test for present bias in a flexible way. We findno evidence for present bias in this market. Even though we allow for ageneral-hyperbolic specification (which has exponential discounting as aspecial case), our estimates converge to an exponential discount functionwith a corresponding discount rate (in our baseline specification) of 8 %.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 11-087/3

Classification and Topics

• Classification: Wirtschaft ; Model Evaluation, Validation, and Selection ; Consumer Economics: Empirical Analysis
• Subject: present bias ; hyperbolic discounting ; discount rate ; hedonic estimation ; Zeitpräferenz ; Abzinsung ; Bodennutzung ; Immobilien-Leasing ; Amsterdam

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gautier, Pieter A. ; van Vuuren, Aico
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/87416
• Last update: 10.03.2025, 11:43 AM CET