Introducing Upfront Money Can Decrease Discounting in Intertemporal Choices with Losses

Abstract

People generally tend to advance gains and postpone losses in intertemporal choice. Jiang et al. (2014) recently showed that adding upfront losses or gains to both smaller and sooner (SS) and larger and later (LL) rewards can decrease people’s discounting. To account for this decrease, they proposed the salience hypothesis, which states that introducing upfront losses or gains makes the money dimension more salient than not, thus increasing people’s preference for LL rewards. Considering that decreasing the discounting of delayed losses is imperative and that most previous studies have focused on intertemporal choices with gains, in the current paper we conducted two experiments and used hypothetical money outcomes to examine whether the effect of upfront money could be extended to intertemporal choices with losses. The results showed that when both SS and LL intertemporal losses were combined with an upfront loss or gain, people’s discounting rate decreased and the preference for the SS option increased. This finding further supports the salience account.

Cumulative weighing of time in intertemporal tradeoffs.

“…The issue of mixed sequences lies wide open as an avenue for future research. There is some evidence ( Jiang, Hu, & Zhu, 2014 ; Rao & Li, 2011 ; Scholten & Read, 2014 ; Sun & Jiang, 2015 ), and a common pattern is that the introduction of mixed sequences increases patience. It may, more generally, be that sequences reduce the salience of time: In choice between single dated outcomes, one only needs to attend to two different outcomes occurring at two different delays, but, when choice involves sequences, the evolution of outcomes must be tracked over time, which may draw attention away from delays, and toward the outcomes (see also Jiang et al, 2014 ; Sun & Jiang, 2015 ).…”

“…There is some evidence ( Jiang, Hu, & Zhu, 2014 ; Rao & Li, 2011 ; Scholten & Read, 2014 ; Sun & Jiang, 2015 ), and a common pattern is that the introduction of mixed sequences increases patience. It may, more generally, be that sequences reduce the salience of time: In choice between single dated outcomes, one only needs to attend to two different outcomes occurring at two different delays, but, when choice involves sequences, the evolution of outcomes must be tracked over time, which may draw attention away from delays, and toward the outcomes (see also Jiang et al, 2014 ; Sun & Jiang, 2015 ). However, our analysis shows that there is much more to preferences for sequences than just an overall rise in patience, and past evidence on preference for unmixed sequences already attests to this, in the form of the asymmetric hidden-zero effect, the front-end amount effect, the relocation effect, and the amplification effect (see Table 6 ).…”

Price-Denomination Effect: Choosing to Pay With Denominations That Are the Same as the Product Prices

“…Relatedly, when people value a product in a foreign currency they have a tendency to be more influenced by the face value, without making the necessary adjustments for the exchange rates ( Raghubir and Srivastava, 2002 ). Also, the salience of money (whether money is introduced earlier or later in a decision) influences how people discount money, which in turn influences their choices and decisions ( Jiang et al, 2016 ). Another way in which consumers violate the descriptive invariance principle is by spending more when they use a credit card versus when they use cash ( Raghubir and Srivastava, 2008 ), and spending more when holding smaller versus larger denominations ( Mishra et al, 2006 ; Raghubir and Srivastava, 2009 ).…”

Are Parents Patient? The Influence of Parenting Role Salience and Parental Status on Impatience

“…Other factors also contribute to future discounting, including opportunity cost consideration ( Zhao et al, 2015 ) and the resource slack hypothesis that people may misperceive their resource abundance in the future than in the present time ( Zauberman and Lynch, 2005 ). Existing research shows that future discounting may be influenced by various factors, including visceral factors ( Loewenstein, 1996 ), certainty of the outcomes ( Keren and Roelofsma, 1995 ; Weber and Chapman, 2005 ), monetary priming ( Jiang et al, 2016 ), power ( Duan et al, 2017 ), and mental representation ( Malkoc et al, 2010 ). In the current paper, we are interested in the influence of parental role salience on intertemporal choices.…”