Andersen, S. and Harrison, G. W. and Lau, M. I. and Rutström, E. E. (2013) 'Discounting behaviour and the magnitude effect : evidence from a field experiment in Denmark.', Economica., 80 (320). pp. 670-697.
Abstract
We evaluate the claim that individuals exhibit a magnitude effect in their discounting behaviour, where higher discount rates are inferred from choices made with lower principals, all else being equal. If the magnitude effect is quantitatively significant, it is not appropriate to use one discount rate that is independent of the scale of the project for cost–benefit analysis and capital budgeting. Using data from a field experiment in Denmark, we find statistically significant evidence of a magnitude effect that is much smaller than is claimed. This evidence surfaces only if one controls for unobserved individual heterogeneity in the population.
| Item Type: | Article |
|---|---|
| Full text: | (AM) Accepted Manuscript Download PDF (213Kb) |
| Status: | Peer-reviewed |
| Publisher Web site: | http://dx.doi.org/10.1111/ecca.12028 |
| Publisher statement: | This is the accepted version of the following article: Andersen, S., Harrison, G. W., Lau, M. I. and Rutström, E. E. (2013), Discounting Behaviour and the Magnitude Effect: Evidence from a Field Experiment in Denmark. Economica, 80 (320): 670–697, which has been published in final form at http://dx.doi.org/10.1111/ecca.12028. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving. |
| Date accepted: | No date available |
| Date deposited: | 19 December 2014 |
| Date of first online publication: | October 2013 |
| Date first made open access: | No date available |
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