The endogeneity of time preference and analysis of collective behavior

Abstract

This essay proposes that time preference is an essential component of analysis of collective behavior and provision of public goods. It addresses the validity of the assumption that time preference, as a parameter in individual utility functions, is exogenous and fi xed. While individual time discounting is used to predict many social phenomena, it is quite often applied in a fi xed form where the possibility of change is rarely discussed. The mechanism of change in individual time discounting is explored in different social contexts, using student, inmate and drug addict populations. This study establishes that certain parameters, such as the length of exposure to new environment and new social connections, are of extreme importance in determining the degree of change in time discounting.