Estimating Discount Rates Using Referendum-style Choice Experiments: An Analysis of Multiple Methods

There is a growing literature that utilizes stated preference surveys to estimate discount rates. A review of the literature reveals large variation both in the discount rate estimates coming from different stated preference surveys and in the specific methodologies used to estimate discount rates. While most methods use similar theory and logic in deriving discount rate estimates, it is an open question how much of the variation seen in the literature is due to differences in methodology. Using a single data set, we estimate annual discount rates using six different methodologies and find that most of our estimates are tightly clustered between 25 31%. One methodology yields an outlier value of 200%. We also use multiple metrics to examine which methodology yields the “right” discount rate. Key Words: Discount rate; mixed logit; discrete choice experiment