Adv Behav Econ pdf

203
T I M E D I S C O U N T I N G
Choice tasks are the most common experimental method for eliciting discount
rates. In a typical choice task, subjects are asked to choose between a smaller,
more immediate reward and a larger, more delayed reward. Of course, a single
choice between two intertemporal options only reveals an upper or lower bound
on the discount rate—for example, if a person prefers one hundred units of some-
thing today over one hundred-twenty units a year from today, the choice merely
implies a discount rate of 
atleast 
20% per year. To identify the discount rate more
precisely, researchers often present subjects with a series of choices that vary the
delay or the amount of the rewards. Some studies use real rewards, including
money, rice, and corn. Other studies use hypothetical rewards, including mone-
tary gains and losses, and more or less satisfying jobs available at different times.
(See table 6.1 for a list of the procedures and rewards used in the different studies.)
Like all experimental elicitation procedures, the results from choice tasks can
be affected by procedural nuances. A prevalent problem is an anchoring effect:
when respondents are asked to make multiple choices between immediate and de-
layed rewards, the first choice they face often influences subsequent choices. For
instance, people would be more prone to choose $120 next year over $100 imme-
diately if they first chose between $100 immediately and $103 next year than if
they first chose between $100 immediately and $140 next year. In general, im-
puted discount rates tend to be biased in the direction of the discount rate that
would equate the first pair of options to which they are exposed (see Green et al.
1998). Anchoring effects can be minimized by using titration procedures that ex-
pose respondents to a series of opposing anchors—for example, $100 today or
$101 in one year? $100 today or $10,000 in one year? $100 today or $105 in one
year? and so on. Since titration procedures typically only offer choices between
an immediate reward and a 
greater 
future reward, however, even these procedures
communicate to respondents that they should be discounting, and potentially bias
discount rates upward.
Matching tasks 
are another popular method for eliciting discount rates. In
matching tasks, respondents “fill in the blank” to equate two intertemporal options
(for example, $100 now
5
$__ in one year). Matching tasks have been conducted
with real and hypothetical monetary outcomes and with hypothetical aversive
health conditions (again, see table 6.1 for a list of the procedures and rewards
used in different studies). Matching tasks have two advantages over choice tasks.
First, because subjects reveal an indifference point, an exact discount rate can be
imputed from a single response. Second, because the intertemporal options are
not fully specified, there is no anchoring problem and no suggestion of an ex-
pected discount rate (or range of discount rates). Thus, unlike choice tasks,
matching tasks cannot be accused of simply recovering the expectations of the ex-
perimenters that guided the experimental design.
Although matching tasks have some advantages over choice tasks, there are
reasons to be suspicious of the responses obtained. First, responses often appear
to be governed by the application of some simple rule rather than by time prefer-
ence. For example, when people are asked to state the amount in 
n 
years that
equals $100 today, a very common response is $100
3
n
. Second, the responses

---