Present-bias, quasi-hyperbolic discounting, and fixed costs

Jess Benhabib, Alberto Bisin, Andrew Schotter

    Research output: Contribution to journalArticle

    Abstract

    In this paper we elicit preferences for money-time pairs via experimental techniques. We estimate a general specification of discounting that nests exponential and hyperbolic discounting, as well as various forms of present bias, including quasi-hyperbolic discounting.We find that discount rates are high and decline with both delay and amount, as most of the previous literature. We also find clear evidence for present bias. When identifying the form of the present bias, little evidence for quasi-hyperbolic discounting is found. The data strongly favor instead a specification with a small present bias in the form of a fixed cost, of the order of $4 on average across subjects. With such a fixed cost the curvature of discounting is imprecisely estimated and both exponential and hyperbolic discounting cannot be rejected for several subjects.

    Original languageEnglish (US)
    Pages (from-to)205-223
    Number of pages19
    JournalGames and Economic Behavior
    Volume69
    Issue number2
    DOIs
    StatePublished - Jul 2010

    Fingerprint

    Fixed costs
    Present bias
    Quasi-hyperbolic discounting
    Discounting
    Hyperbolic discounting
    Discount rate
    Curvature

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Finance

    Cite this

    Present-bias, quasi-hyperbolic discounting, and fixed costs. / Benhabib, Jess; Bisin, Alberto; Schotter, Andrew.

    In: Games and Economic Behavior, Vol. 69, No. 2, 07.2010, p. 205-223.

    Research output: Contribution to journalArticle

    Benhabib, Jess ; Bisin, Alberto ; Schotter, Andrew. / Present-bias, quasi-hyperbolic discounting, and fixed costs. In: Games and Economic Behavior. 2010 ; Vol. 69, No. 2. pp. 205-223.
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