Preferences show greater stability for transactions than for gambles in cost discounting
Jones, S. and Oaksford, Michael (2011) Preferences show greater stability for transactions than for gambles in cost discounting. Frontiers in Psychology 2 , ISSN 1664-1078.
Many factors point to the underlying instability of preferences in choice behavior. In particular, discounting reveals some effects not consistent with stable preferences. In discounting, the subjective value of a reward reduces as the uncertainty of or delay to obtaining it increases. The function relating subjective value to delay or probability must be exponential with a constant discount rate to respect transitivity over time, i.e., if A > B and B > C, then A > C (“ > ” = is preferred to). If the discount rate varies with value or time, then it is possible for transitivity to be violated, i.e., for preferences to be unstable. And people do show unstable, preference reversals over time in intertemporal choice more consistent with a hyperbolic discounting function (e.g., Myerson and Green, 1995). Thus, while someone may prefer £100 for certain now rather than £110 tomorrow, they will prefer £110 in a year and a day over £100 in a year’s time. People discount rate is very high initially, more rapid than the exponential, but over time it decreases leading to a flatter function than the exponential. Consequently, the £10 difference is almost totally discounted in the short term, but in a year’s time the extra day barely reduces the subjective value we attach to gaining an extra £10.
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|School:||Birkbeck Schools and Departments > School of Science > Psychological Sciences|
|Date Deposited:||16 Jan 2012 14:24|
|Last Modified:||17 May 2016 15:55|
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