Estimating Individual Discount Rates in Denmark: A Field Experiment

Estimating Individual Discount Rates in Denmark: A Field Experiment

November 2001 | Glenn W. Harrison, Morten I. Lau and Melonie B. Williams
This document introduces a field experiment conducted in Denmark to estimate individual discount rates using real monetary rewards. The experiment, part of the AgEcon Search project, aims to provide insights into how individuals value future money streams, which is crucial for cost-benefit analysis. The study involved 268 participants aged 19 to 75, and the results indicate that discount rates are constant over 6-month to 3-year horizons but vary with socio-demographic characteristics such as age, income, and marital status. Discount rates decline with age after middle age, suggesting that specific household types can be assumed to have constant discount rates, but not all households. The study also highlights the importance of considering market rates and potential censoring effects when eliciting discount rates. The findings have implications for economic modeling and policy-making, particularly in welfare analyses and inter-temporal decision-making.This document introduces a field experiment conducted in Denmark to estimate individual discount rates using real monetary rewards. The experiment, part of the AgEcon Search project, aims to provide insights into how individuals value future money streams, which is crucial for cost-benefit analysis. The study involved 268 participants aged 19 to 75, and the results indicate that discount rates are constant over 6-month to 3-year horizons but vary with socio-demographic characteristics such as age, income, and marital status. Discount rates decline with age after middle age, suggesting that specific household types can be assumed to have constant discount rates, but not all households. The study also highlights the importance of considering market rates and potential censoring effects when eliciting discount rates. The findings have implications for economic modeling and policy-making, particularly in welfare analyses and inter-temporal decision-making.
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