Time is Knowledge: What Response Times Reveal

Response times contain information about economically relevant but unobserved variables like willingness to pay, preference intensity, quality, or happiness. We provide a general characterization of the properties of latent variables that can be detected using response time data. Our theoretical framework unifies and generalizes existing results in the literature and gives rise to many new applications. We illustrate the novel insights that the method can deliver through three empirical applications: identifying an optimal nudge, testing decreasing marginal happiness of income, and predicting treatment heterogeneity.