Patience Auctions: The Impact of Time vs. Money Bidding on Elicited Discount Rates

Publication Date:
Jan 2010
Project Programs:
Behavioral Economics

We introduce two auction-based methods for eliciting discount rates. In these “patience auctions”, participants bid the smallest future sum they would prefer -or- the longest time they would wait for a reward, rather than receive a smaller, immediate payoff. The most patient bidder receives the delayed reward; all others receive the immediate payoff. These auctions, in addition to offering certain potential methodological advantages, allow us to compare discounting when participants’ attention is focused on the temporal vs. monetary dimension of delayed rewards. We find that the best-fitting model and rate of discounting differ between these two theoretically equivalent bidding methods.

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