Discounting of Environmental Goods and Discounting in Social Contexts

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 choose which option you prefer in each pair: • 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 choose which option you prefer in each pair: • 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 choose which option you prefer in each pair: 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 0.6 0.5 0.4 0.3 Mean Negative Ln Delta 0.2 0.1 0 -0.1 -0.2 $+ $- air+ air- transit+ garbage- Scenario

Study 1: Results 0.6 *** 0.5 0.4 0.3 Mean Negative Ln Delta 0.2 0.1 0 -0.1 -0.2 $+ $- air+ air- transit+ garbage- *** p < .001 Scenario

Study 1: Results 0.6 *** *** 0.5 0.4 0.3 Mean Negative Ln Delta 0.2 0.1 0 -0.1 -0.2 $+ $- air+ air- transit+ garbage- *** p < .001 Scenario

Study 1: Results 0.6 *** *** *** 0.5 0.4 0.3 Mean Negative Ln Delta 0.2 0.1 0 -0.1 -0.2 $+ $- air+ air- transit+ garbage- *** p < .001 Scenario

Study 2: Results 0.6 0.5 0.4 0.3 Mean Negative Ln Delta 0.2 0.1 0 -0.1 -0.2 $+ $- air+ air- health+ health- Scenario

Study 2: Results 0.6 *** 0.5 0.4 0.3 Mean Negative Ln Delta 0.2 0.1 0 -0.1 -0.2 $+ $- air+ air- health+ health- *** p < .001 Scenario

Study 2: Results 0.6 *** *** 0.5 0.4 0.3 Mean Negative Ln Delta 0.2 0.1 0 -0.1 -0.2 $+ $- air+ air- health+ health- *** p < .001 Scenario

Study 2: Results 0.6 *** *** *** 0.5 0.4 0.3 Mean Negative Ln Delta 0.2 0.1 0 -0.1 -0.2 $+ $- air+ air- health+ health- *** p < .001 Scenario

Study 2: Results ** 0.6 *** 0.5 0.4 0.3 Mean Negative Ln Delta 0.2 0.1 0 -0.1 -0.2 $+ $- air+ air- health+ health- ** p < .01 *** p < .001 Scenario

Study 2: Results ** 0.6 *** 0.5 0.4 0.3 Mean Negative Ln Delta 0.2 0.1 0 -0.1 ** ** -0.2 $+ $- air+ air- health+ health- ** p < .01 *** p < .001 Scenario

Study 2: Discount Correlations ** = 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).

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? Prize Money Task $65Today ???In Three Months

Discounting by Frame & Condition * * 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

Discounting of Environmental Goods and Discounting in Social Contexts