Scandinavian Working Papers in Economics
CLTS Working Papers,
Norwegian University of Life Sciences, Centre for Land Tenure Studies
No 9/23: Intertemporal Choice Lists and Maximal Likelihood Estimation of Discount Rates
Dag Einar Sommervoll (), Stein T. Holden () and Mesfin Tilahun ()
Additional contact information
Dag Einar Sommervoll: Centre for Land Tenure Studies, Norwegian University of Life Sciences, Postal: Centre for Land Tenure Studies, Norwegian University of Life Sciences, P.O. Box 5003, NO-1432 Aas, Norway
Stein T. Holden: Centre for Land Tenure Studies, Norwegian University of Life Sciences, Postal: Centre for Land Tenure Studies, Norwegian University of Life Sciences, P.O. Box 5003, NO-1432 Aas, Norway
Mesfin Tilahun: Centre for Land Tenure Studies, Norwegian University of Life Sciences, Postal: Centre for Land Tenure Studies, Norwegian University of Life Sciences, P.O. Box 5003, NO-1432 Aas, Norway
Abstract: The experiments designed to estimate real-life discount rates in intertemporal choice often rely on ordered choice lists, where the list by design aims to capture a switch point between near- and far-future alternatives. Structural models like a Samuelson discounted utility model are often fitted to the model using maximal likelihood estimation. We show that dominated tasks, that is, choices that do not define the switch point, may bias ML estimates profoundly and predictably. More (less) dominated near future tasks give higher (lower) discount rates. Simulation analysis indicates estimates may remain largely unbiased using switch point-defining tasks only.
Keywords: Choice lists; time discounting; maximal likelihood estimation
Language: English
20 pages, December 19, 2023
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