Good or Bad,We Want it Now: Fixed‐cost Present Bias for Gains and Losses Explains Magnitude Asymmetries in Intertemporal Choice

Intertemporal tradeoffs are ubiquitous in decision making, yet preferences for current versus future losses are rarely explored in empirical research. Whereas rational‐economic theory posits that neither outcome sign (gains vs. losses) nor outcome magnitude (small vs. large) should affect delay discount rates, both do, and moreover, they interact: in three studies, we show that whereas large gains are discounted less than small gains, large losses are discounted more than small losses. This interaction can be understood through a reconceptualization of fixed‐cost present bias, which has traditionally described a psychological preference for immediate rewards. First, our results establish present bias for losses—a psychological preference to have losses over with now. Present bias thus predicts increased discounting of future gains but decreased (or even negative) discounting of future losses. Second, because present bias preferences do not scale with the magnitude of possible gains or losses, they play a larger role, relative to other motivations for discounting, for small magnitude intertemporal decisions than for large magnitude intertemporal decisions. Present bias thus predicts less discounting of large gains than small gains but more discounting of large losses than small losses. The present research is the first to demonstrate that the effect of outcome magnitude on discount rates may be opposite for gains and losses and also the first to offer a theory (an extension of present bias) and process data to explain this interaction. The results suggest that policy efforts to encourage future‐oriented choices should frame outcomes as large gains or small losses. Copyright © 2012 John Wiley & Sons, Ltd.     

Hope over experience: desirability and the persistence of optimism

Many important decisions hinge on expectations of future outcomes. Decisions about health, investments, and relationships all depend on predictions of the future. These expectations are often optimistic: People frequently believe that their preferred outcomes are more likely than is merited. Yet it is unclear whether optimism persists with experience and, surprisingly, whether optimism is truly caused by desire. These are important questions because life's most consequential decisions often feature both strong preferences and the opportunity to learn. We investigated these questions by collecting football predictions from National Football League fans during each week of the 2008 season. Despite accuracy incentives and extensive feedback, predictions about preferred teams remained optimistically biased through the entire season. Optimism was as strong after 4 months as it was after 4 weeks. We exploited variation in preferences and matchups to show that desirability fueled this optimistic bias.     

Automatic Optimism: Why People Assume Their Futures will be Bright

Why are people optimistic about their futures, continuously assuming that their futures will be full of the positive outcomes they desire and devoid of negative outcomes? This paper concerns the proposal that desire, represented as affective reactions to potential future events, causes optimism for the future. We propose that positive or negative affective reactions to future events innervate motivations to approach or avoid the events. These motivations can be satiated by judging that events that elicit positive affective reactions are likely to occur and events that elicit negative affective reactions are unlikely to occur. The tendency to be optimistic thus results from emotional processes that occur largely outside of conscious awareness. We discuss recent evidence that supports these propositions, the import of understanding optimism as the result of emotional processes for judgment and decision research as well as attempts to improve decision‐making, and remaining unresolved issues.     

Contingent Weighting in Self-Other Decision Making

Three studies are presented that examine the decision-making processes that lead advisors to have preferences distinct from personal decision makers (Kray & Gonzalez, 1999). Advising and personal decision making were hypothesized to invoke different interpersonal frames, which lead to different weighting of decision attributes. Alternatively, advisors might simply exert less effort in decision making for others than do personal decision makers. In Study 1, the contingent weighting of attributes was examined in two decision-making tasks (choice vs. matching). Advisors were more likely to choose in a manner consistent with "what most people would prefer" than personal decision makers, but no differences in preferences were observed in the matching task. Advisors subsequently reported experiencing less regret and blame and more strongly preferred the chosen alternative than did personal decision makers. In Study 2, advisors considered more decision attributes to be important in the abstract compared to personal decision makers, and the choice pattern of Study 1 was replicated. In Study 3, advisors and personal decision makers generated more considerations when making a decision compared to individuals making decisions in the abstract. Finally, the preferences of personal decision makers were more consistent with their reported attribute importance judgments than were those of advisors. In total, the results suggest advisors incorrectly infer others' preferences, rather than suffer from a deficit of motivation, when giving advice. Copyright 2000 Academic Press.     

Preference reversals with losses

People who prefer larger, later gains over smaller, sooner gains when considering outcomes far in the future often reverse their preference as the alternatives become closer in time. This finding, which is contrary to a normative economic account of intertemporal choice, has been interpreted as support for hyperboloid discounting, but the results can also be explained by steeper discounting of smaller amounts. The present study is the first to demonstrate that analogous preference reversals occur with losses: People who preferred a smaller, sooner loss over a larger, later loss when the outcomes were far in the future reversed their preference when these alternatives were closer in time. Because there was no magnitude effect (i.e., smaller losses were not discounted more steeply than larger losses), the present findings strongly support the proposition that reversals in preference between delayed outcomes occur because of the hyperboloid shape of the discounting function.     

Understanding the coherence of the severity effect and optimism phenomena: Lessons from attention

Claims that optimism is a near-universal characteristic of human judgment seem to be at odds with recent results from the judgment and decision making literature suggesting that the likelihood of negative outcomes are overestimated relative to neutral outcomes. In an attempt to reconcile these seemingly contrasting phenomena, inspiration is drawn from the attention literature in which there is evidence that both positive and negative stimuli can have attentional privilege relative to neutral stimuli. This result provides a framework within which I consider three example phenomena that purport to demonstrate that people’s likelihood estimates are optimistic: Wishful thinking; Unrealistic comparative optimism and Asymmetric belief updating. The framework clarifies the relationships between these phenomena and stimulates future research questions. Generally, whilst results from the first two phenomena appear reconcilable in this conceptualisation, further research is required in reconciling the third.     

Planning, personality, and prediction: The role of future focus in optimistic time predictions

The present studies examined cognitive processes underlying the tendency to underestimate project completion times. Two experiments tested the hypothesis that people generate overly optimistic predictions, in part, because they focus narrowly on their future plans for the target task and thus neglect other useful sources of information. Consistent with the hypothesis, instructing participants to adopt a “future focus”—in which they generated concrete, specific plans for the task at hand—led them to make more optimistic predictions about when they would complete their intended Christmas shopping (Study 1) and major school assignments (Study 2). The future focus manipulation did not have a corresponding effect on actual completion times, and thus increased the degree of optimistic bias in prediction. The studies also demonstrated that the optimistic prediction bias generalized across different task domains, relevant individual differences (i.e., trait optimism and procrastination), and other contextual variations.     

健康领域的跨期决策与健康行为

健康领域的跨期决策关系着个体和国民的健康和福祉。目前学界对该领域的研究主要停留在参考传统金钱领域的相关理论模型和方法的阶段, 但健康跨期决策具有领域特异性, 沿袭金钱领域理论模型和方法, 导致该领域在研究方法和结果上存在较大的不一致性。健康跨期决策的行为后果是该领域关注重点, 多数研究均报告个体的低时间折扣率、高未来时间取向与其健康保护行为正相关, 与健康风险行为呈负相关。该领域也关注健康跨期决策的影响机制, 如决策对象和决策主体的核心特征等因素。未来研究亟需发展适用于健康领域的跨期决策模型和研究范式, 明确健康行为与跨期决策偏好的关系, 深入探讨健康跨期决策的内在选择机制, 并在健康行为干预和医疗卫生政策应用方面进行更多的尝试和探索。     

Domain-based asymmetry in expectations of the future

We examine how prior outcomes can influence expectations about unrelated future events. Consistent with the affect literature, we first predict that prior outcomes will yield more optimistic expectations when the outcomes are positively, rather than negatively, valenced. We then predict that the impact of prior outcomes will depend on not only the valence, but also the domain of prior outcomes. Specifically, we draw from Prospect theory to predict that the impact of prior outcomes on future expectations will be greater in the domain of losses than in the domain of gains. Two lottery-based experiments demonstrate that this effect is robust across different starting and ending wealth states, and a third experiment shows that these differences in expectations also translate into differences in risk preferences.     

Feelings of dread and intertemporal choice

It frequently has been observed that people discount future rewards relative to present rewards. However, the literature on intertemporal choices involving emotional upsets and losses is fraught with inconsistencies, with some studies finding similar discounting of gains and losses, and others reporting that participants elect to undergo negative experiences sooner rather than later. To help resolve these contradictions, time preferences for different types of aversive experiences (social rejection, embarrassment, pain, monetary and property loss) were examined in five studies. Most participants preferred to postpone monetary and property losses, but intertemporal choices for other unpleasant experiences showed highly variable responses, with some participants deferring them as long as possible, and many electing to experience them immediately. Time preferences for these negative experiences were correlated, but were independent of time preference for rewards. It is argued (following Loewenstein, 1987 ) that anticipation of dread plays a key role in many people's choices about timing of aversive experiences. This interpretation was supported by choices about when to learn of a very unpleasant event whose timing was fixed (Study 3), and by a novel preference reversal (Study 4). Study 5 examined how actual and hypothetical experiences of dread unfolded over time; the results were consistent with a dread‐based interpretation of choices in the preceding studies. Copyright © 2010 John Wiley & Sons, Ltd.     

时间感知在跨期决策中的作用——时间决策模型的新探索

“时间”是跨期决策的“必需品”, 人们感知到的延迟时间决定跨期决策的结果。近年来, 研究者发现“时间长度感知”、“时间资源感知”和“时间框架感知”是时间感知作用于跨期决策的主要方式。时间感知的神经作用机制包含微观层面和宏观层面两种。“对数/指数时间折扣模型”、“感知时间基础模型”及“多模态漂移扩散模型”解释了时间感知的作用方式。然而, 现有理论模型还存在诸多局限, 主要包括“长短时距预测偏差”和“实际决策与预期决策偏差”两个方面。因此, 深入探讨时间感知影响跨期决策的基本方式, 分析现有理论模型的局限性并提出整合的机制框架具有十分重要的意义。未来研究亟需进一步整合时间感知的理论模型, 开展脑机制与应用方面的研究, 从深层揭露时间感知的作用本质, 帮助个人与社会更理性地决策。     

How long will it take? Power biases time predictions

People tend to underestimate the time it takes to accomplish tasks. This bias known as the planning fallacy derives from the tendency to focus attention too narrowly on the envisaged goal and to ignore additional information that could make predictions more accurate and less biased. Drawing on recent research showing that power induces attentional focus, four studies tested the hypothesis that power strengthens the tendency to underestimate future task completion time. Across a range of task domains, and using multiple operationalizations of power, including actual control over outcomes (Study 1), priming (Studies 2 and 3), and individual differences (Study 4), power consistently led to more optimistic and less accurate time predictions. Support was found for the role of attentional focus as an underlying mechanism for those effects. Differences in optimism, self-efficacy, and mood did not contribute to the greater bias in powerful individuals’ forecasts. We discuss the implications of these findings for institutional decision processes and occupational health.     

Is Optimism Always Best?: Future Outlooks and Preparedness

ABSTRACT— Although people generally appear optimistic about the future, they shift from optimism under certain circumstances. Drawing from a recent review of the literature, we describe how both optimism and shifts from optimism serve the common goal of preparedness, which includes a readiness to deal with setbacks and a readiness to take advantage of opportunities. Shifts from optimism occur in response to available information and to the possibility that things may not turn out as hoped. People tend to shift from optimism when feedback is anticipated in the near future, when the outcome is important, when negative outcomes are easily imagined, and when the outcomes are uncontrollable. In addition, people with low self-esteem shift from optimism more readily than do people with high self-esteem. Finally, both optimism and shifts from optimism have unique benefits in terms of preparedness.     

Do Measures of Executive Functioning and Manipulation of Ego Depletion Predict How University Students Discount Probabilistic Gains and Losses?

Discounting occurs when the subjective value of an outcome is altered because the outcome is delayed or uncertain. Previous research has suggested that how individuals discount delayed gains is related to executive functioning. The present study attempted to extend this relationship to discounting of probabilistic gains and losses, and to examine whether diminishing cognitive resources would impact how participants discounted monetary outcomes. In Experiment 1, university students completed an executive function measure and then a probability-discounting task that involved the hypothetical sum of either $1,000 or $100,000 framed as either a gain or a loss. The executive function of organization was a significant predictor of how participants discounted all four outcomes while motivational drive predicted discounting of losses, but not gains. In Experiment 2, participants completed the same measures with the addition of an ego-depletion task to deplete cognitive resources before making discounting decisions. The executive function of motivational drive and empathy were significant predictors of how participants discounted both loss outcomes. The results suggest that discounting of monetary outcomes is related to the executive function of organization for gains and motivational drive, and empathy for losses. They also support the notion that the discounting of gains may be a distinct process from the discounting of losses.     

Time preferences for the very long term

Many important decisions concern outcomes delayed by decades or centuries. Whereas some economists have argued that inter-generational discount rates should be lower than intra-generational rates, three experiments found that inter- and intra-generational discount rates were quite similar. Experiment 1 found that discount rates for long delays (30-900 years) were lower than those for shorter delays (1-30 years) but that, holding delay constant, discount rates for outcomes occurring to future generations were similar to those for outcomes occurring to the present generation. Experiment 2 compared inter-generational discount rates for three different types of outcomes and found similar discount rates for saving lives, improving health, and financial benefits. Experiment 3 found similar inter-generational discounting of life-saving programs that benefit people close to or distant from the decision maker. These studies indicate that the discount rate applied to outcomes occurring to future generations depends on the length of the time delay but not on other factors.     

The evolution of decision-making under risk: Framing effects in monkey risk preferences

When making choices between risky options, human decision-makers exhibit a number of framing effects. One of the most prominent framing effects is the tendency for decision makers to evaluate gambles relative to a reference point, and to act risk-seeking when prospects are framed as losses but risk-averse when identical prospects are framed as gains. This tendency for risk-preferences to reverse between loss and gain frames has been termed the reflection effect, and is one of the primary predictions of Prospect Theory. Here, we explore whether non-human primates exhibit a similar reflection effect. Using a token-trading task, we show that capuchin monkeys (Cebus apella) exhibit an analogous reversal of risk preferences depending on whether outcomes are presented as gains or losses, suggesting that similar framing effects also influence choice in non-human primates. This finding suggests that the mechanisms that drive framing effects in humans may be evolutionarily ancient, extending broadly across the primate order.     

Optimism,Agency, and Success

Does optimism lead to success? Friends of optimism argue that positive beliefs about ourselves and our future contribute to our fitness and mental health, and are correlated with good functioning, productivity, resilience, and pro-social behaviour. Sceptics, instead, claim that when we are optimistic we fail to react constructively to negative feedback, and put ourselves at risk because we underestimate threats. Thus, it is controversial whether optimistic beliefs are conducive to success, intended as the fulfilment of our goals in a given domain. According to the traditional view, optimistic beliefs lead to success when they do not involve any distortion of reality, and according to the trade-off view, they lead to success when they involve a distortion of reality, but a small one. Based on the literature about positive illusions in the perception of romantic partners and in the assessment of future health prospects, I suggest that optimistic beliefs lead to goal attainment when they support agency by contributing to the sense that we are competent and efficacious agents and that our goals are both desirable and attainable.     

Intertemporal Framing Issues in Management Compensation

This study investigates whether manager–decision-makers’ expectations about incentive compensation and environmental uncertainty influence investment decisions through their effect on the decision maker's implied discount rate. This is, to our knowledge, a first attempt to manipulate implicit risk, the risk to future payoffs associated with environmental uncertainty. Both these factors and waiting time are expected to influence implied discount rates. The study investigates discount rate influences under both bonus and penalty incentive plans. The hypothetical bonuses are year-end cash bonuses; the penalties are opportunity costs. Responses were analyzed using both analysis of variance and regression. The regression analysis was used to separate time discounting from the other factors affecting implied discount rates. Subjects’ responses to proposed changes in the timing of cash bonuses were dramatic when an expanding economy was suggested. However, subjects’ responses to penalty provisions were less dramatic than corresponding responses to the out-of-pocket negative outcomes studied in previous research. In some situations, penalty provisions may be more effective for inducing investment than bonus provisions. In addition, the results suggest that efforts to change management decision making using deferred compensation may require more deferred compensation than time discounting alone would require.     

Effects of valence and framing in decision-making: Assessing decision-makers' perceived domains of choice

Abstract: In comparison between choice alternatives, judgments of “How much better is a preferred option?” and “How much worse is a less preferred option?” may differ in their magnitudes. Such discrepancies are called “valence effects”. Previously, Yamagishi and Miyamoto (1996 ) observed systematic positive valence effects (“Better” exceeding “Worse”) in the domain of gains and systematic negative valence effects (“Worse” exceeding “Better”) in the domain of losses. The current experiments used the directions of valence effects as a tool to assess decision‐maker's interpretation of choice tasks under “framing effects” ( Tversky & Kahneman, 1986 ). Preferences under the framing effect switch from certain options in the domain of gains to uncertain options in the domain of losses. Two experiments showed that preferences for certain options were associated with positive valence effects, whereas preferences for uncertain options were associated with negative valence effects. Moreover, conditions wherein the framing manipulations lose the effectiveness were examined. Valence effects showed that framing effects ceased to occur when decision‐makers maintained consistent domain perceptions as pertaining to gains or to losses, across the domains of gains and losses. Implications are discussed.