Time preferences and consumer behavior
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We investigate the predictive power of survey-elicited time preferences. The discount factor elicited from choice experiments using real payments predicts various health, energy, and financial outcomes, including overall self-reported health, smoking, installing energy-efficient lighting, and credit card balance. Allowing for time-inconsistent preferences, both the long-run and present-bias discount factors (δ and β) are also significantly associated in the expected direction with several outcomes. We consider several hypotheses regarding the strength of the association between discount factors and outcomes, such as salience of the outcome or liquidity constraints.
KeywordsTime preferences Time-inconsistency Health Energy Risk and time Discounting Present bias
JEL ClassificationsD91 D03 I12 Q40 D14
We thank Will Mautz and Camden Sweed for valuable research assistance, Georgia State University, the University of North Carolina at Greensboro, and the Harvard Center for Risk Analysis for funding, Darren Lubotsky for providing his code to implement the multiple proxies procedure, and Allen Bellas and conference and seminar participants at UNCG, GSU, Georgia Tech, the Federal Trade Commission, the Midwest Economics Association meetings, and the Harvard Center For Risk Analysis’s March 2014 “Risk, Perception, and Response” conference for helpful comments. Ruhm thanks the University of Virginia Bankard Fund for partial financial support. The views expressed in this article are those of the authors and do not necessarily reflect those of the Federal Trade Commission.
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