Gautier, \PieterA.\ and \Van Vuuren\, A. (2020). Identifying present bias and time preferences with an application to land-lease-contract data Econometrics Journal, 23(3):363--385.
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Affiliated author
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Publication year2020
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JournalEconometrics Journal
What can contracts-traded and priced in a competitive market and featuring a prespecified system of future payments-teach us about time preferences and present bias? We first show that identification of present bias requires assumptions on the felicity function and that agents must have credit constraints on consumption expenditure. Moreover, when there is heterogeneity in present bias, identification requires that agents with the same present bias parameter buy houses with different contracts. We illustrate our findings with observational land-lease-contract data from Amsterdam.