We propose a simple method for eliciting individual time preferences without estimating utility functions even in settings where background consumption changes over time. It relies on lottery tickets with high rewards. In a standard intertemporal choice model high rewards decouple lottery choices from variation in background consumption. We validate our elicitation method experimentally on two student samples: one asked in December when their current budget is reduced by extraordinary expenditures for Christmas gifts; the other asked in February when no such extra constraints exist. We illustrate an application of our method with unemployed job seekers which naturally have income/consumption variation.
Eliciting time preferences when income and consumption vary: Theory, validation & application to job search
We propose a simple method to elicit time preferences at the individual level even when income and consumption varies over time. We validate the method and apply it to correlate individuals’ impatience with job search behavior and success.