Wednesday, 18 July 2012

Prepared to wait? New research challenges the idea that we favour small rewards now over bigger later

The old idea that we make decisions like rational agents has given way over the last few decades to a more realistic, psychologically informed picture that recognises the biases and mental short-cuts that sway our thinking. Supposedly one of these is hyperbolic discounting - our tendency to place disproportionate value on immediate rewards, whilst progressively undervaluing distant rewards the further in the future they stand. But not so fast, say Daniel Read at Warwick Business School and his colleagues with a new paper that fails to find any evidence for the phenomenon.

Studies of hyperbolic discounting have often involved participants choosing between a smaller sooner reward and a later larger reward at two time points. When both rewards are in the distant future, people will pick the larger reward, but when the smaller reward is imminent then it's the one that's favoured.

Read's team criticise these kinds of studies on several counts, including the fact that participants often know that the first decision is hypothetical (thus increasing the chance they'll give the socially desirable answer), and the fact that participants often get to interact between the two decision points, which can lead to social influences.

For the new research, Read and his colleagues tested 128 participants from the LSE and Leeds Business School, sending them four weekly emails each containing several choices. The first Tuesday, the participants indicated in an email whether they'd prefer £20 immediately or £21 in one week; £21 in one week or £22 in two weeks; £22 in three weeks or £23 in four weeks; £23 in five weeks or £24 in six weeks. The following Tuesday they made the same choices, but updated for the progress of time, beginning with £21 immediately or £22 in one week, and ditto for the next two Tuesdays. The participants were told that a random selection of them would receive one of their choices, with the reward coming at the appropriate time, thus lending some reality to the task.

If hyperbolic discounting is real, there should have been evidence of the participants showing a greater preference for smaller sooner rewards the more imminent they became. No such effect was found. The researchers also looked at the ratio of choice switches - when participants favoured one option at one time point, but changed their mind later on - in terms of whether they changed to being more patient or to being more impatient. Contrary to hyperbolic discounting, switches to greater patience (favouring larger rewards later) were just as common as the other way around.

A second study built on these findings with 201 US citizens first making a choice between $20 three weeks from today vs. $21 five weeks from today; and then making the choice again three weeks later, so that the smaller reward was imminent and the slightly larger reward was two weeks hence. Some of the participants were told they were making the choice for real (and they were - the researchers even took turns sleeping so that they could fire back vouchers in timely fashion); others were told there was a chance of their choices being acted on for real.

Once again, no evidence was found for hyperbolic discounting. Just as many participants switched to greater patience at the second choice. And the smaller sooner reward was actually chosen slightly less often at the second choice, when it was immediate.

Read's team recognise that there is widespread evidence for myopic decision making - just think of the times you've vowed that your future self will eat healthy food, but when the choice is imminent you go for short-term flavour over long-term health. But they think there's a big question mark over hyperbolic discounting per se as the explanation for these effects. More promising theories, Read and his colleagues believe, are "visceral arousal theory", in which we're motivated to prioritise our primary needs over longer term aims; and "temporal construal theory", in which we represent distant events more abstractly in terms of superordinate (lofty) goals, whilst seeing the short-term more concretely, in terms of our more basic needs.

If hyperbolic discounting is such a fundamental feature of human thinking, Read and his team conclude, then how come research on regret finds that most people rue, not their overindulgence, but their past failures to indulge?

How do these debates fit with your own experiences? Do you find that you favour immediate rewards, even if you could get a bigger reward by waiting?


Read D, Frederick S, and Airoldi M (2012). Four days later in Cincinnati: Longitudinal tests of hyperbolic discounting. Acta Psychologica, 140 (2), 177-85 PMID: 22634266

Post written by Christian Jarrett for the BPS Research Digest.


Anonymous said...

Thanks for a fantastic article.

Anonymous said...

I was lucky enough to study with Read at the LSE. He's a great lecturer, but more importantly he has a particular skill in knowing how to ask the right question.

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