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Eliciting time preferences when income and consumption vary: Theory, validation & application to job search

Author

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  • Belot, Michele
  • Kircher, Philipp

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Muller, Paul

Abstract

We propose a simple method for eliciting individual time preferences without estimating utility functions even in settings where background consumption changes over time. It relies on eliciting preferences for receiving high stakes lottery tickets at different points in time. In a standard intertemporal choice model high rewards decouple lottery choices from variation in background consumption. We validate our elicitation method experimentally on a student sample split into two groups: one asked in December when their current budget is reduced by extraordinary expenditures for Christmas gifts; the other asked in February when no such extra constraints exist. We illustrate an application of our method with unemployed job seekers which naturally have income/consumption variation.

Suggested Citation

  • Belot, Michele & Kircher, Philipp & Muller, Paul, 2021. "Eliciting time preferences when income and consumption vary: Theory, validation & application to job search," LIDAM Discussion Papers CORE 2021035, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2021035
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    More about this item

    Keywords

    Time preferences ; experimental elicitation ; job search ; hyperbolic discounting;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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