Hyperbolic Discounting of Public Goods

W. Kip Viscusi, Joel Huber

NBER Working Paper No. 11935
Issued in January 2006
NBER Program(s):   HC   LE   PE   EEE

This article examines revealed rates of time preference for public goods, using environmental quality as the case study. A nationally representative panel-based sample of 2,914 respondents considered a series of 5 conjoint policy choices, yielding 14,570 decisions. Both the conditional fixed effect logit estimates of the random utility model and mixed logit estimates implied that the rate of time preference is very high for immediate improvements and drops off substantially thereafter, which is inconsistent with exponential discounting but consistent with hyperbolic discounting. The implied marginal rate of time preference declines and then rises. Estimates of the quasi-hyperbolic discounting parameter range from 0.48 to 0.61. People who are older are especially likely to have a high disutility from delays in improving water quality.

(203 K)

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

This paper is available as PDF (203 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX