Paid and hypothetical time preferences are the same: Lab, field and online evidence

Abstract

The use of real decision-making incentives remains under debate after decades of economic experiments. In time preferences experiments involving future payments, real incentives are particularly problematic due to between-options differences in transaction costs, among other issues. What if hypothetical payments provide accurate data which, moreover, avoid transaction cost problems? In this paper, we test whether the use of hypothetical or one-out-of-ten-participants probabilistic—versus real—payments affects the elicitation of short-term and long-term discounting in a standard multiple price list task. We analyze data from a lab experiment in Spain and well-powered field and online experiments in Nigeria and the UK, respectively (N = 2,043). Our results indicate that the preferences elicited using the three payment methods are mostly the same: we can reject that either hypothetical or one-out-of-ten payments change any of the four preference measures considered by more than 0.18 SD with respect to real payments.