Differences In Time Preference Research Articles

The effect of duration and time preference on the gap between adult and child health state valuations in time trade-off

Composite time trade-off (cTTO) utilities have been found to be higher when adults value health states for children than for themselves. It is not clear if these differences reflect adults assigning truly higher utilities to the same health state in different perspectives, or if they are caused by other factors, which are not accounted for in the valuation procedure. We test if the difference between children’s and adults’ cTTO valuations changes if a longer duration than the standard 10 years is used. Personal interviews with a representative sample of 151 adults in the UK were conducted. We employed the cTTO method to estimate utilities of four different health states, where adults considered states both from their own and a 10-year-old child’s perspective, for durations of 10 and 20 years. We corrected the cTTO valuations for perspective-specific time preferences in a separate task, again for both perspectives. We replicate the finding that cTTO utilities are higher for the child perspective than for the adult perspective, although the difference is only significant when controlling for other variables in a mixed effects regression. Time preferences are close to 0 on average, and smaller for children than adults. After correcting TTO utilities for time preferences, the effect of perspective is no longer significant. No differences were found for cTTO tasks completed with a 10- or 20-year duration. Our results suggest that the child–adult gap is partially related to differences in time preferences and, hence, that correcting cTTO utilities for these preferences could be useful.

Managers' cultural origin and corporate response to an economic shock

We exploit the exogenous Covid-19 shock in a bicultural area of Italy to identify cultural differences in the way companies respond to economic shocks. Firms with managers of diverse cultural backgrounds resort to different forms of government aid, diverge in their investment decisions, and have different growth rates. These findings are consistent with cultural differences in time preferences and debt aversion. Specifically, we find that the response of managers belonging to a more long-term oriented culture is characterized by a lower recourse to debt, more investments and higher growth rates. Overall, our results show that the cultural origin of managers significantly affects firms' reaction to economic shocks and real economic outcomes.

Time and lexicographic preferences in the valuation of EQ-5D-Y with time trade-off methodology

In the valuation of EQ-5D-Y-3L, adult respondents are asked to complete composite time trade-off (cTTO) tasks for a 10-year-old child. Earlier work has shown that cTTO utilities elicited in such a child perspective are generally higher than when adults take their own perspective. We explore how differences in time preference in child and adult perspectives could explain this effect. Furthermore, as cTTO valuation in a child perspective involves explicit consideration of immediate death for a child, we also consider how cTTO utilities could be affected by decision-makers lexicographically avoiding death in children. We report the results of an experiment in which 219 respondents valued 5 health states in both adult and child perspectives with either a standard cTTO or a lead-time TTO only approach, in which immediate death is less focal. Time preferences were measured in both perspectives. Our results suggest that utilities were lower when lead-time TTO, rather than cTTO, was used. We find large heterogeneity in time preference in both perspectives, with predominantly negative time preference. The influence of time preferences on utilities, however, was small, and correcting for time preferences did not reduce differences between utilities elicited in both perspectives. Surprisingly, we found more evidence for differences in utilities between adult and child perspectives when lead-time TTO was used. Overall, these results suggest that time and lexicographic preferences affect time trade-off valuation in child and adult perspectives, but are not the explanation for differences between these perspectives. We discuss the implications of our findings for EQ-5D-Y-3L valuation.

Is time preference different across incomes and countries?

We offer direct statistical evidence of existing differences in time preference across income classes and countries by estimating and testing an Euler equation for consumption on time series data for six European countries and five income quantiles. We unequivocally reject the hypothesis of homogeneous time preference across countries, whereas heterogeneity across income classes is confirmed to different degrees depending on the country, but with time preference being lowest for the last two quantiles of the income distribution.

Age differences in intertemporal choice: U-shaped associations in a probability sample of German households.

To describe adult age differences in intertemporal choice, we analyzed data from 1,491 participants who completed an incentivized monetary intertemporal discounting choice task involving different conditions (e.g., time delay of 12 months vs. 1 month). Respondents completed a number of other survey measures including behavioral measures of cognitive ability and self-reports concerning health, financial security, and demographic characteristics. We found significant quadratic (U-shaped) effects of age in task conditions involving 12-month (but not 1-month) delays, with middle-aged adults proving most patient relative to younger and older adults. The age effects found were robust to the inclusion of covariates, including cognitive ability, that have been suggested to underlie individual and age differences in time preferences. The results favor theories that propose nonlinear effects of age-related processes or multiple mechanisms underlying the development of intertemporal choice across the life span and suggest that it is important to consider long time delays and wide age ranges when trying to understand age differences in time preferences. (PsycINFO Database Record

Language group differences in time preferences: Evidence from primary school children in a bilingual city

We study differences in intertemporal choices across language groups in an incentivized experiment with 1154 children in a bilingual city. The sample consists of 86% of all primary school kids in Meran/Merano, where about half of the 38,000 inhabitants speak German, and the other half Italian, while both language groups live very close to each other. We find that German-speaking primary school children are about 16 percentage points more likely than Italian-speaking children to delay gratification in an intertemporal choice experiment. The difference remains significant in several robustness checks and when controlling for a broad range of factors, including risk attitudes, IQ, family background, or residential area. Hence, we are able to show that language group affiliation, which is often used as a proxy for culture, plays an important role in shaping economic preferences already early in life.

Different domains – Different time preferences?

The vast majority of studies examining the relation between time preferences and health behavior have applied a measure of preferences in the financial rather than in the health domain. Most studies find a small but significant correlation. If time preferences for health and money are not the same, this can have substantial consequences for the reliability of these results. In the present paper, we set out to examine potential differences in time preferences between the two domains – money and health.Preferences over time were elicited using a stated preference matching method. Using a split sample design, the health domain was described in the context of back pain. Individuals were to match a certain sooner shorter period of pain relief against a later longer period of pain relief in the health domain, while the match in the financial domain was described as a match between a sooner smaller monetary reward and a larger later monetary reward. Data was collected through an online survey, distributed to a sample of members of fitness dk on the 7th of February 2016 and the 6th of March 2016 yielding a sample of 1687 members.In the analyses we assume quasi-hyperbolic discounting which allows us to estimate both a parameter measuring present bias and a parameter measuring impatience at an individual level. Our results demonstrate remarkably similar time preference estimates for both long term discounting and present biasedness. When analyzing differences between subgroups we observe small but significant differences between time preferences for women, retirees and individuals with a longer education.Our results shows that time preferences measured in the money and health domain in our sample are close to identical but that small differences occur in certain subgroups.

Can Smoking Harm Your Long-Term Saving Decisions?

Previous research suggests that cigarette smoking is considered to be a major preventable risk to human health. One explanation for smoking, provided by the literature, is that it could be explained by differences in time preferences; smokers are considered to have higher discount rates, implying that they will demand higher compensation in order to postpone any consumption from the present to the future. Concerns that are related to time preference and individual choices are also related to long-term saving decisions. One of the long standing puzzles, with regard to long-term saving choices, is the “Annuity Puzzle”. Theory suggests that annuities have substantial value, and that retirees should generally use annuities to increase their utility in retirement. However, empirical work finds little evidence of the purchase of annuities.We extend this line of research, investigating annuitization decisions of smokers, by using data from an Israeli insurance corporation. We find that, surprisingly, smokers, as compared to non-smokers, do not prefer the lump-sum option. A possible explanation for this finding could be that even though literature finds a close relationship between smoking and medical condition, smokers do not perceive themselves as having a shorter lifespan, meaning that smokers experience self-illusions regarding life expectancy. We support this conjecture with a survey we conducted that investigated the life expectancy and health perception of smokers and non-smokers.

The Agricultural Origins of Time Preference.

This research explores the origins of observed differences in time preference across countries and regions. Exploiting a natural experiment associated with the expansion of suitable crops for cultivation in the course of the Columbian Exchange, the research establishes that pre-industrial agro-climatic characteristics that were conducive to higher return to agricultural investment, triggered selection, adaptation and learning processes that generated a persistent positive effect on the prevalence of long-term orientation in the contemporary era. Furthermore, the research establishes that these agro-climatic characteristics have had a culturally embodied impact on economic behavior such as technological adoption, education, saving, and smoking.

Effect of Time Preferences on Optimal Prices and Profitability of Advance Selling

In advance selling, firms announce that they will charge different prices for those who buy early vs. those who buy late. Previous literature showed that advance selling allows for increased profits in a rather wide range of settings, which typically hold in many service industries. Despite ample evidence that consumers exhibit higher discount rates than firms, it is not clear how differences in time preferences affect optimal prices of advance selling. This article develops an analytical model for optimal prices in advance selling that accounts for such differences in time preferences. In contrast to previous literature, the results indicate that advance selling quickly becomes less profitable than spot selling if consumers discount at a higher rate than firms (and vice versa). They also show that previous findings about the optimality of different advance selling strategies are unaffected if consumers and firms discount at the same rate, despite different optimal prices. Another major implication of our work is that analytical models and managerial decision making should consider time preferences if payment and consumption might occur at different points in time.

Time preferences and the management of coral reef fisheries

To investigate a potential relationship between financial and marine resource use decisions, we conducted a time preference experiment with 153 fishers and 197 SCUBA divers on Curaçao and Bonaire. The experiment was part of a socioeconomic survey wherein interviewees were asked about their fishing and diving practices, views on fish population and coral reef health, and preferred marine resource management approaches. We use a βδ-model to identify discounting and present bias. Divers had a mean individual discount factor (IDF) of 0.91, significantly higher than fishers' mean of 0.82. Fishers and divers had similar distributions of IDFs and present bias; overall 66% of interviewees were non-biased, 22% future-biased, and 12% present-biased. IDFs and present bias were able to predict management preferences after controlling for demographic factors. However, the effect of discount factors is unique to divers, and the effect of present bias is concentrated among fishers on Curaçao. Differences in time preferences between fishers and divers should be considered when developing management strategies. Transfer payments from the dive industry could facilitate a transition to sustainable fishing practices. Establishing property rights alone may not be sufficient for ensuring sustainability if fishers are present-biased and greatly discount the future.

Gender differences in time preferences

This paper reports the results from a large online experiment in which we examine gender differences in time preferences. Subjects choose in different situations between receiving an immediate payment and receiving a different sum later. We find that more men than women are impatient and choose to receive the immediate payment, at least if the implicit interest rate of the “late” option is neither too high nor too low.

The Agricultural Origins of Time Preference

This research explores the origins of observed differences in time preference across countries and regions. Exploiting a natural experiment associated with the expansion of suitable crops for cultivation in the course of the Columbian Exchange, the research establishes that pre-industrial agro-climatic characteristics that were conducive to higher return to agricultural investment, triggered selection, adaptation and learning processes that generated a persistent positive effect on the prevalence of long-term orientation in the contemporary era. Furthermore, the research establishes that these agro-climatic characteristics have had a culturally embodied impact on economic behavior such as technological adoption, education, saving, and smoking.

An Evangelical Anomaly: Religious Observance and Intertemporal Choice

Educational achievement is positively correlated with religious devotion. However, those religious sects which are more devoted have, on average, lower levels of education. Evangelical Protestants, for example, have the highest level of religious devotion but the lowest level of educational achievement. Previous research explains this by proposing that education enhances the gains to social interaction while substituting for religious belief. We examine an alternative hypothesis, where religion is a moderator of time preference across potential investments, including: savings, social capital, and human capital. We use the COPPS and wealth supplements of the Panel Study of Income Dynamics (PSID) to observe household investments of time and money for various religious groups. Consistent discounting across a range of investments by the religious would indicate that differences in time preferences, rather than idiosyncratic attitudes toward education, account for differential investments across religious groups. Our results suggest that education is the anomaly, and that Evangelical Protestants do not behave differently than other religious groups in areas of altruism or saving. Instead, we find that differences in the level of devotion to religious activities provides the sharpest differences in investment behavior.

Masters of our time: Impatience and self-control in high-level chess games

This paper presents empirical findings on gender differences in time preference and inconsistency based on international, high-level chess panel data with a large number of observations, including a control for ability. Due to the time constraint in chess, it is possible to study performance and choices related to time preferences. The results suggest that men play shorter games on average and pay a higher price to end the game sooner. They also perform worse in shorter game compared to women but better in longer games. Furthermore, women perform worse in time pressure (the 40th move time control). The results are consistent with the interpretation that men are more impatient (with a lower discount factor) but also more inconsistent in the sense that they tend to be too impatient. Women, on the other hand, are more inconsistent as they tend to over-consume reflection time in the beginning, leading to time pressure later.

Time Preference and Time Use: Do Smokers Exercise Less?

AbstractUsing matched data from the Tobacco Use Supplements to the Current Population Surveys and the American Time Use Surveys, this paper examines how differences in time preference, as measured by smoking status, affect time spent on various non‐market activities in a day. Even after controlling for a host of variables, the results show that individuals with a higher rate of time preference — current smokers — spend more time on non‐market activities that provide immediate gratification, such as watching television, but less time on non‐market activities that provide long‐term returns, such as exercising and education, compared with those who never smoked.

Social Time Preferences for Health and Money Elicited with a Choice Experiment

Objectives In economic evaluations future health and monetary outcomes are commonly discounted at equal and constant rates. The theoretical foundation of this practice is being debated and appropriate discount rates for costs and health effects are sought. Here, we have derived social discount rates for health, money, and environmental benefits by means of a choice experiment. Methods All choices were framed from a social perspective. We investigated differences in time preference by domain (health, monetary benefits, environmental benefits), time delay (5, 10, and 40 years), and respondent characteristics. Respondents were 173 health-care professionals and 34 health policymakers. Choice titration was used to determine when the respondent was indifferent between future and present benefits. Results At least two-thirds of respondents preferred an intervention with immediate benefits to delayed benefits in the different domains. The median (mean) yearly discount rates for health benefits were 2.7% (10.7%), 1.3% (3.5%), and 1.1% (2.3%) assuming a 5, 10, and 40 years delay, respectively. Social time preference for monetary benefits was significantly stronger, with median (mean) yearly discount rates of 6.6% (18.7%) and 4.8% (11.2%) assuming a 5 and 10 years delay, respectively. The social time preference with regard to environmental benefits was similar to the monetary benefits. Social time preference for the different domains was significantly correlated at the individual level. Conclusions The empirically derived social time preference is in line with current theoretical arguments for a lower discount rate for health benefits than for monetary benefits. Moreover, the implied median discount rates for health were lower than those commonly used or advocated in guidelines.

Understanding Patterns of Social Security Benefit Receipt, Pensions Incomes, Retirement and Saving by Race, Ethnicity, Gender and Marital Status: A Structural Approach

In this paper we use data from the Health and Retirement Study to examine differences in retirement behavior, wealth, Social Security and pension benefits by race and gender. The differences observed among groups are sometimes substantial. We then estimate models jointly explaining retirement and wealth by race and gender. We decompose differences in outcomes into those due to differences in parameters of the preference function for leisure and goods, time preference rates, and those due to differences in the circumstances of the members of each group. By circumstances we mean both the opportunity set, and factors that determine the disutility of continued work, such as health status. We find that differences in outcomes among white, black and Hispanic males are not due to differences in preferences for leisure and goods consumption, but are due both to differences in time preference and to differences in circumstances. Differences in outcomes between men and women are primarily due to differences in preferences.

Short-term cost for long-term benefit: Time preference and cancer control.

A tradeoff between short-term costs and long-term gains characterizes many cancer control behaviors, such as behavior change (e.g., quitting smoking), screening (e.g., mammography), and prevention (e.g., healthy diet). One factor that may influence these tradeoffs is time preference, or the value assigned to future outcomes relative to immediate ones. Studies of the relationship between individual differences in time preference and preventive health behaviors, however, have yielded mixed results. Time preference is related to addictive behaviors (e.g., smoking) but not to other preventive health behaviors (e.g., vaccination). This pattern of results suggests that time preference measures reflect an ability to forgo immediate gratification that is applicable to hot behaviors, such as smoking, but not to cold behaviors, such as vaccination.

Moral Hazard, Time Preferences and Stock Options

This paper presents a model of moral hazard where differences in actions are driven by differences in time-preferences rather than differences in risk-preferences. The paper discusses two solutions to the time-preference induced incentive problem. First, in some circumstances, the incentive problem can be solved by increasing the power of the incentive contract. Second, stock options may solve the incentive problem. Taken together these two results provide an explanation for why stock options are popular in firms with low current profits and high expected future profits.