Eliciting Individual-Specific Discount Rates

Foundation (SBR 98-18875, 4/99-12/02) The opinions expressed in this paper are those of the authors and do not necessarily reflect the opinions of the Federal Reserve Board of Governors or its staff. Very helpful comments and suggestions were pro-vided by JR DeShazo, David Layton, and session participants at the Second World Congress of Environmental and Resource Economists (Monterey, CA, June 2002). The authors thank Vilija Gulbinas for able research assistance during the program-ming of the survey, and countless faculty at colleges and universities throughout the US and Canada who have introduced the online survey to their classes and encouraged them to participate. Without their generous help, this study could not have been completed. 1 Eliciting Individual-Specific Discount Rates Longstanding debate over the appropriate social discount rate for public projects stems from our lack of knowledge about how individual discount rates vary across people and across choice con-texts. Using a sample of roughly 15,000 choices by over 2000 individuals, we estimate utility-theoretic models concerning private tradeoffs involving money over time that reveal individual-specific discount rates. We control for experimentally differentiated choice scenarios, sociodemo-graphic heterogeneity, and elicitation formats, and complex forms of heteroscedasticity. Statisti