Discounting of Environmental
Goods and Discounting in
Social Contexts
David J. Hardisty1; Kerry F. Milch1; Kirstin Appelt1;
Michel J. J. Handgraaf2; Poonam Arora1;
David H. Krantz1; Elke Weber1
1Columbia
University
2University of Amsterdam
SJDM Annual Meeting
11/17/2007
How Are Environmental Outcomes
Different From Monetary Outcomes?
► Many
people are affected
► Social goals
► Difficult to quantify
► Ambiguous probabilities
► Often longer time horizon
► Often less domain familiarity
Study Objectives
► Compare
discount rates for environmental
and monetary outcomes when equalizing
the previous factors as much as possible
► Compare with health discounting
► See if typical framing manipulations affect
discounting of environmental outcomes
Experimental Overview
►2
Studies
► 184 US residents, recruited & run online
► Within subjects designs
► Hypothetical monetary, environmental &
health scenarios
► DV: transformed discount factor, -lnδ
Monetary Gain Scenario
Imagine you just won a lottery, worth $250,
which will be paid to you immediately.
However, the lottery commission is giving
you the option of receiving a different
amount, paid to you one year from now.
Indifference Point Elicitation
► Please
pair:
choose which option you prefer in each
[ ] Win $250 immediately
[ ] Win $410 one year from now.
[ ] Win $250 immediately
[ ] Win $390 one year from now.
[ ] Win $250 immediately
[ ] Win $370 one year from now.
...
...
► Please
fill in the number that would make you
indifferent between the following two options:
A. Win $250 immediately.
B. Win $
one year from now.
Indifference Point Elicitation
► Please
pair:
choose which option you prefer in each
[ ] Win $250 immediately
[x] Win $410 one year from now.
[ ] Win $250 immediately
[x] Win $390 one year from now.
[x] Win $250 immediately
[ ] Win $370 one year from now.
...
...
► Please
fill in the number that would make you
indifferent between the following two options:
A. Win $250 immediately.
B. Win $ 380 one year from now.
Monetary Loss Scenario
Imagine you just got a parking fine for
$250…
Air Quality Scenarios
► Imagine
the current air quality in your area is
moderate
► Temporary emissions regulation test will
immediately improve [worsen] air quality for 3
weeks
► Alternately, the test may be carried out one year
from now, for a different length of time
► We are interested in your
preference, as someone who
will be personally affected by
it
Indifference Point Elicitation
► Please
pair:
choose which option you prefer in each
[ ] Improved air quality
immediately, for 21 days.
[ ] Improved air quality one
year from now, for 37 days.
[ ] Improved air quality
immediately, for 21 days.
[ ] Improved air quality one
year from now, for 35 days.
[ ] Improved air quality
immediately, for 21 days.
[ ] Improved air quality one
year from now, for 33 days.
...
...
Please fill in the number that would make you indifferent
between the following two options:
A. Improved air quality immediately, for 21 days.
B. Improved air quality one year from now, for ____ days.
Other Scenarios
► Improvement
in mass transit
► Garbage piling up in the streets
Study 2:
► Air Quality Index (rather than # of days)
► Health Gains and Losses (Chapman, 1996)
Study 1: Results
Mean Negative Ln Delta
0.6
0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2
$+
$-
air+
air-
Scenario
transit+
garbage-
Study 1: Results
Mean Negative Ln Delta
0.6
***
0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2
$+
$-
air+
air-
Scenario
transit+
garbage*** p < .001
Study 1: Results
Mean Negative Ln Delta
0.6
***
***
0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2
$+
$-
air+
air-
Scenario
transit+
garbage*** p < .001
Study 1: Results
Mean Negative Ln Delta
0.6
***
***
***
0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2
$+
$-
air+
air-
Scenario
transit+
garbage*** p < .001
Study 2: Results
Mean Negative Ln Delta
0.6
0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2
$+
$-
air+
air-
Scenario
health+
health-
Study 2: Results
Mean Negative Ln Delta
0.6
***
0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2
$+
$-
air+
air-
Scenario
health+
health*** p < .001
Study 2: Results
Mean Negative Ln Delta
0.6
***
***
0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2
$+
$-
air+
air-
Scenario
health+
health*** p < .001
Study 2: Results
Mean Negative Ln Delta
0.6
***
***
***
0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2
$+
$-
air+
air-
Scenario
health+
health*** p < .001
Study 2: Results
**
Mean Negative Ln Delta
0.6
***
0.5
0.4
0.3
0.2
0.1
0
-0.1
-0.2
$+
$-
air+
air-
Scenario
health+
health** p < .01
*** p < .001
Study 2: Results
**
Mean Negative Ln Delta
0.6
***
0.5
0.4
0.3
0.2
0.1
0
-0.1
**
-0.2
$+
$-
air+
air-
Scenario
**
health+
health** p < .01
*** p < .001
Study 2: Discount Correlations
$+
$-
Air +
Air -
Health + Health -
$+
$-
-.04
Air +
.39***
-.03
Air -
-.01
.09
.11
Health + .39***
-.15
.39***
.04
Health -
.269**
-.13
.03
-.14
-.07
** = p < .01, *** = p < .001
Study 2: Discount Correlations
$+
$-
Air +
Air -
Health + Health -
$+
$-
-.04
Air +
.39***
-.03
Air -
-.01
.09
.11
Health + .39***
-.15
.39***
.04
Health -
.269**
-.13
.03
-.14
-.07
** = p < .01, *** = p < .001
Study 2: Discount Correlations
$+
$-
Air +
Air -
Health + Health -
$+
$-
-.04
Air +
.39***
-.03
Air -
-.01
.09
.11
Health + .39***
-.15
.39***
.04
Health -
.269**
-.13
.03
-.14
-.07
** = p < .01, *** = p < .001
Study 2: Discount Correlations
$+
$-
Air +
Air -
Health + Health -
$+
$-
-.04
Air +
.39***
-.03
Air -
-.01
.09
.11
Health + .39***
-.15
.39***
.04
Health -
.269**
-.13
.03
-.14
-.07
** = p < .01, *** = p < .001
Discussion
► When
equalizing as many factors as possible,
environmental outcomes discounted similarly to
monetary outcomes
► Interpretation: Participants applied their strategies
for monetary choices to the environmental
situations
► Gain/loss framing effects much more important
than domain/topic
► Discount rates constructed based on contextual
features
Intertemporal Choice
Predecided vs. Naïve Groups
►
Participants: 3-person groups
 Drawn from campus clubs, organizations, & offices
 N = 33
 2 conditions: predecided vs. naïve
►
Task: decide whether to accept small additional $ today
or to wait for larger sum to be delivered in 3 months
 Split evenly among group members
 Group decision binding
►
Frame: delay vs. accelerate
 Delay: $65 today or more in 3 months (up to $120)
 Accelerate: $75 in 3 months or smaller amount today (as low as
$20)
Intertemporal Choice
You have won a $65 ($75) check which will
be divided evenly among the people in your
group and given to each of you at the end of
this experiment (in 3 months). However,
you could receive a larger amount 3
months from today (smaller amount
today).
Prize Money Task
$65
Today
►
???
In Three Months
►
Remember that the amount of the money that you
receive today is $65. How large would the amount
of money in the second envelope (that you would
receive in 3 months) have to be before you would
prefer the second envelope?
Mean Negative Ln (Discount Factor)
Discounting by Frame & Condition
1.4
1.2
1
0.8
*
delay
accelerate
0.6
0.4
0.2
0
individuals predecided
naïve
* p < .05
Thanks to...
► Elke
Weber & Dave Krantz
► The CRED & PAM labs
► The Center for the Decision Sciences
► The National Science Foundation
► Research Assistants: Aleksandra Petrović,
Tara Wedin, & Jill Colvin
Thank You!
References
Chapman, G. B. (1996). Temporal
Discounting and Utility for Health and
Money. Journal of Experimental
Psychology: Learning, Memory, and
Cognition, 22, 771-791