WP 2020-09 Constant Discounting, Temporal Instability and Dynamic Inconsistency in Denmark: A Longitudinal Field Experiment

Forthcoming, International Economic Review

AUTHORS: Glenn W. Harrison, Morten I. Lau and Hong Il Yoo

ABSTRACT: Claims that individuals have dynamically inconsistent preferences are usually made by studying individual discount rates over different time delays, but where those discount rates are elicited at a single point in time. However, to test dynamic inconsistency one has to know if the same subject has a different discounting function at a later point in time. We evaluate data from a longitudinal field experiment undertaken with a nationally representative sample of the adult Danish population. We cannot reject the hypothesis of constant discounting at the population level, but we reject the hypotheses of temporal stability and dynamic consistency.