Measuring Preferences Over the Temporal Resolution of Consumption Uncertainty

58 Pages Posted: 3 Sep 2015 Last revised: 18 Jan 2021

See all articles by Thomas Meissner

Thomas Meissner

Technische Universität Berlin (TU Berlin); Maastricht University - Department of Economics

Philipp Pfeiffer

European Union - European Commission; Technische Universität Berlin (TU Berlin)

Date Written: January 17, 2021

Abstract

Timing premia measure how much consumption people are willing to forgo to resolve all consumption uncertainty immediately. We develop a novel experiment that allows to elicit these attitudes directly, in a model-free way. On average subjects forgo around 5\% of their total consumption to resolve all uncertainty immediately. Recursive utility models postulate a structural link between timing premia and deep preference parameters. We elicit these preference parameters separately, and estimate corresponding predicted timing premia. Comparing directly elicited and predicted timing premia allows to test this structural link. Surprisingly, we find a negative correlation between predicted and elicited timing premia.

Keywords: Recursive Utility, Timing of Resolution of Uncertainty, Preference Elicitation, Timing Premia, Risk and Time Preferences

JEL Classification: C90, D80, D90

Suggested Citation

Meissner, Thomas and Pfeiffer, Philipp, Measuring Preferences Over the Temporal Resolution of Consumption Uncertainty (January 17, 2021). Available at SSRN: https://ssrn.com/abstract=2654668 or http://dx.doi.org/10.2139/ssrn.2654668

Thomas Meissner (Contact Author)

Technische Universität Berlin (TU Berlin) ( email )

Straße des 17
Juni 135
Berlin, 10623
Germany

Maastricht University - Department of Economics ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Philipp Pfeiffer

European Union - European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

Technische Universität Berlin (TU Berlin) ( email )

Straße des 17
Juni 135
Berlin, 10623
Germany

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
318
Abstract Views
2,472
Rank
173,870
PlumX Metrics