Abstract
When agents have present bias, they discount more between now and the next period than between period t (> 1) and t + 1. How fast the future’s discount rate evaluated today decays is an empirical question. We show that the discount function can be non-parametrically identified using contracts that specify payments that take place at various points in time in the future and which are traded and priced in a market. We then use ground lease data from Amsterdam which have this characteristic to test for present bias in a flexible way. We find that a general-hyperbolic specification performs best, but that it is only slightly prefered above the much simples exponential specification.
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