Limits...
Cumulative Weighing of Time in Intertemporal Tradeoffs

View Article: PubMed Central - PubMed

ABSTRACT

We examine preferences for sequences of delayed monetary gains. In the experimental literature, two prominent models have been advanced as psychological descriptions of preferences for sequences. In one model, the instantaneous utilities of the outcomes in a sequence are discounted as a function of their delays, and assembled into a discounted utility of the sequence. In the other model, the accumulated utility of the outcomes in a sequence is considered along with utility or disutility from improvement in outcome utilities and utility or disutility from the spreading of outcome utilities. Drawing on three threads of evidence concerning preferences for sequences of monetary gains, we propose that the accumulated utility of the outcomes in a sequence is traded off against the duration of utility accumulation. In our first experiment, aggregate choice behavior provides qualitative support for the tradeoff model. In three subsequent experiments, one of which incentivized, disaggregate choice behavior provides quantitative support for the tradeoff model in Bayesian model contests. One thread of evidence motivating the tradeoff model is that, when, in the choice between two single dated outcomes, it is conveyed that receiving less sooner means receiving nothing later, preference for receiving more later increases, but when it is conveyed that receiving more later means receiving nothing sooner, preference is left unchanged. Our results show that this asymmetric hidden-zero effect is indeed driven by those supporting the tradeoff model. The tradeoff model also accommodates all remaining evidence on preferences for sequences of monetary gains.

No MeSH data available.


Screen shot from choice pair #11.
© Copyright Policy - open-access
Related In: Results  -  Collection

License
getmorefigures.php?uid=PMC4998108&req=5

fig1: Screen shot from choice pair #11.

Mentions: In Experiment 1, we examine, within the “hidden-zero paradigm,” how the preference between low and high NPV sequences is affected when the zero outcomes are revealed. We introduce two changes to elicitation of preference between the low and high NPV options. First, we use multiples of £100 below the £1,000 mark. Indeed, a partial explanation of the preference for the low NPV option might be that the number “1,000” acquires special significance among numbers that are merely multiples of “100.” We therefore use tasks in which the numbers are “300” and “600,” or “400” and “800.” Second, we present the choice pairs in delay-by-payoff matrices, with the options designated as “plans,” as shown in Figure 1 (see also Manzini et al., 2010; Gigliotti & Sopher, 1997). In our informal inquiries and initial surveys, the choice pairs were presented as follows:


Cumulative Weighing of Time in Intertemporal Tradeoffs
Screen shot from choice pair #11.
© Copyright Policy - open-access
Related In: Results  -  Collection

License
Show All Figures
getmorefigures.php?uid=PMC4998108&req=5

fig1: Screen shot from choice pair #11.
Mentions: In Experiment 1, we examine, within the “hidden-zero paradigm,” how the preference between low and high NPV sequences is affected when the zero outcomes are revealed. We introduce two changes to elicitation of preference between the low and high NPV options. First, we use multiples of £100 below the £1,000 mark. Indeed, a partial explanation of the preference for the low NPV option might be that the number “1,000” acquires special significance among numbers that are merely multiples of “100.” We therefore use tasks in which the numbers are “300” and “600,” or “400” and “800.” Second, we present the choice pairs in delay-by-payoff matrices, with the options designated as “plans,” as shown in Figure 1 (see also Manzini et al., 2010; Gigliotti & Sopher, 1997). In our informal inquiries and initial surveys, the choice pairs were presented as follows:

View Article: PubMed Central - PubMed

ABSTRACT

We examine preferences for sequences of delayed monetary gains. In the experimental literature, two prominent models have been advanced as psychological descriptions of preferences for sequences. In one model, the instantaneous utilities of the outcomes in a sequence are discounted as a function of their delays, and assembled into a discounted utility of the sequence. In the other model, the accumulated utility of the outcomes in a sequence is considered along with utility or disutility from improvement in outcome utilities and utility or disutility from the spreading of outcome utilities. Drawing on three threads of evidence concerning preferences for sequences of monetary gains, we propose that the accumulated utility of the outcomes in a sequence is traded off against the duration of utility accumulation. In our first experiment, aggregate choice behavior provides qualitative support for the tradeoff model. In three subsequent experiments, one of which incentivized, disaggregate choice behavior provides quantitative support for the tradeoff model in Bayesian model contests. One thread of evidence motivating the tradeoff model is that, when, in the choice between two single dated outcomes, it is conveyed that receiving less sooner means receiving nothing later, preference for receiving more later increases, but when it is conveyed that receiving more later means receiving nothing sooner, preference is left unchanged. Our results show that this asymmetric hidden-zero effect is indeed driven by those supporting the tradeoff model. The tradeoff model also accommodates all remaining evidence on preferences for sequences of monetary gains.

No MeSH data available.