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Discounting of Discounting of Environmental Goods Environmental Goods and Discounting in and Discounting in Social Contexts Social Contexts David J. Hardisty David J. Hardisty 1 ; Kerry F. Milch ; Kerry F. Milch 1 ; ; Kirstin Appelt Kirstin Appelt 1 ; Michel J. J. ; Michel J. J. Handgraaf Handgraaf 2 ; Poonam Arora ; Poonam Arora 1 ; ; David H. Krantz David H. Krantz 1 ; Elke Weber ; Elke Weber 1 1 Columbia University Columbia University 2 University of Amsterdam University of Amsterdam SJDM Annual Meeting SJDM Annual Meeting 11/17/2007 11/17/2007

Discounting of Environmental Goods and Discounting in Social Contexts

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Discounting of Environmental Goods and Discounting in Social Contexts. David J. Hardisty 1 ; Kerry F. Milch 1 ; Kirstin Appelt 1 ; Michel J. J. Handgraaf 2 ; Poonam Arora 1 ; David H. Krantz 1 ; Elke Weber 1 1 Columbia University 2 University of Amsterdam SJDM Annual Meeting 11/17/2007. - PowerPoint PPT Presentation

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Page 1: Discounting of Environmental Goods and Discounting in Social Contexts

Discounting of Discounting of Environmental Goods and Environmental Goods and Discounting in Social Discounting in Social ContextsContexts

David J. HardistyDavid J. Hardisty11; Kerry F. Milch; Kerry F. Milch11; Kirstin Appelt; Kirstin Appelt11; ; Michel J. J. HandgraafMichel J. J. Handgraaf22; Poonam Arora; Poonam Arora11; ; David H. KrantzDavid H. Krantz11; Elke Weber; Elke Weber11

11Columbia UniversityColumbia University22University of AmsterdamUniversity of AmsterdamSJDM Annual MeetingSJDM Annual Meeting11/17/200711/17/2007

Page 2: Discounting of Environmental Goods and Discounting in Social Contexts

How Are Environmental How Are Environmental Outcomes Different From Outcomes Different From

Monetary Outcomes?Monetary Outcomes?►Many people are affectedMany people are affected►Social goalsSocial goals►Difficult to quantifyDifficult to quantify►Ambiguous probabilitiesAmbiguous probabilities►Often longer time horizonOften longer time horizon►Often less domain familiarityOften less domain familiarity

Page 3: Discounting of Environmental Goods and Discounting in Social Contexts

Study ObjectivesStudy Objectives

►Compare discount rates for Compare discount rates for environmental and monetary environmental and monetary outcomes when equalizing the outcomes when equalizing the previous factors as much as possibleprevious factors as much as possible

►Compare with health discountingCompare with health discounting►See if typical framing manipulations See if typical framing manipulations

affect discounting of environmental affect discounting of environmental outcomesoutcomes

Page 4: Discounting of Environmental Goods and Discounting in Social Contexts

Experimental OverviewExperimental Overview

►2 Studies2 Studies►184 US residents, recruited & run 184 US residents, recruited & run

onlineonline►Within subjects designsWithin subjects designs►Hypothetical monetary, environmental Hypothetical monetary, environmental

& health scenarios& health scenarios►DV: transformed discount factor, -lnDV: transformed discount factor, -lnδδ

Page 5: Discounting of Environmental Goods and Discounting in Social Contexts

Monetary Gain ScenarioMonetary Gain Scenario

Imagine you just won a lottery, worth Imagine you just won a lottery, worth $250, which will be paid to you $250, which will be paid to you immediately. However, the lottery immediately. However, the lottery commission is giving you the option of commission is giving you the option of receiving a different amount, paid to receiving a different amount, paid to you one year from now. you one year from now.

Page 6: Discounting of Environmental Goods and Discounting in Social Contexts

Indifference Point ElicitationIndifference Point Elicitation

► Please fill in the number that would make you Please fill in the number that would make you indifferent between the following two options:indifferent between the following two options:A. Win $250 immediately.A. Win $250 immediately.B. Win $B. Win $ one year from now. one year from now.

► Please choose which option you prefer in Please choose which option you prefer in each pair: each pair:

[ ] Win $250 immediately [ ] Win $250 immediately [ ] Win $410 one year from [ ] Win $410 one year from now. now.

[ ] Win $250 immediately [ ] Win $250 immediately [ ] Win $390 one year from [ ] Win $390 one year from now. now.

[ ] Win $250 immediately [ ] Win $250 immediately [ ] Win $370 one year from [ ] Win $370 one year from now. now.

...... ......

Page 7: Discounting of Environmental Goods and Discounting in Social Contexts

Indifference Point ElicitationIndifference Point Elicitation

► Please fill in the number that would make you Please fill in the number that would make you indifferent between the following two options:indifferent between the following two options:A. Win $250 immediately.A. Win $250 immediately.B. Win $B. Win $ 380 380 one year from now. one year from now.

[ ] Win $250 immediately [ ] Win $250 immediately [x] Win $410 one year from [x] Win $410 one year from now. now.

[ ] Win $250 immediately [ ] Win $250 immediately [x] Win $390 one year from [x] Win $390 one year from now. now.

[x] Win $250 immediately [x] Win $250 immediately [ ] Win $370 one year from [ ] Win $370 one year from now. now.

...... ......

► Please choose which option you prefer in Please choose which option you prefer in each pair: each pair:

Page 8: Discounting of Environmental Goods and Discounting in Social Contexts

Monetary Loss ScenarioMonetary Loss Scenario

Imagine you just got a parking fine for Imagine you just got a parking fine for $250…$250…

Page 9: Discounting of Environmental Goods and Discounting in Social Contexts

Air Quality ScenariosAir Quality Scenarios

► Imagine the current air quality in your Imagine the current air quality in your area is moderatearea is moderate

► Temporary emissions regulation test will Temporary emissions regulation test will immediately improve [worsen] air quality immediately improve [worsen] air quality for 3 weeks for 3 weeks

► Alternately, the test may be carried out Alternately, the test may be carried out one year from now, for a different length one year from now, for a different length of timeof time

► We are interested in your We are interested in your preference, as someone who preference, as someone who will be personally affected by will be personally affected by itit

Page 10: Discounting of Environmental Goods and Discounting in Social Contexts

Indifference Point ElicitationIndifference Point Elicitation► Please choose which option you prefer in Please choose which option you prefer in

each pair: each pair:

[ ] Improved air quality [ ] Improved air quality immediately, for 21 days. immediately, for 21 days.

[ ] Improved air quality one [ ] Improved air quality one year from now, for 37 days. year from now, for 37 days.

[ ] Improved air quality [ ] Improved air quality immediately, for 21 days. immediately, for 21 days.

[ ] Improved air quality one [ ] Improved air quality one year from now, for 35 days. year from now, for 35 days.

[ ] Improved air quality [ ] Improved air quality immediately, for 21 days. immediately, for 21 days.

[ ] Improved air quality one [ ] Improved air quality one year from now, for 33 days. year from now, for 33 days.

...... ......

Please fill in the number that would make you indifferent Please fill in the number that would make you indifferent between the following two options:between the following two options:A. Improved air quality immediately, for 21 days.A. Improved air quality immediately, for 21 days.B. Improved air quality one year from now, for ____ days. B. Improved air quality one year from now, for ____ days.

Page 11: Discounting of Environmental Goods and Discounting in Social Contexts

Other ScenariosOther Scenarios

► Improvement in mass transitImprovement in mass transit►Garbage piling up in the streetsGarbage piling up in the streets

Study 2:Study 2:►Air Quality Index (rather than # of Air Quality Index (rather than # of

days)days)►Health Gains and Losses (Chapman, Health Gains and Losses (Chapman,

1996)1996)

Page 12: Discounting of Environmental Goods and Discounting in Social Contexts

Study 1: ResultsStudy 1: Results

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

$+ $- air+ air- transit+ garbage-

Scenario

Me

an

Neg

ati

ve L

n D

elt

a

Page 13: Discounting of Environmental Goods and Discounting in Social Contexts

Study 1: ResultsStudy 1: Results

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

$+ $- air+ air- transit+ garbage-

Scenario

Me

an

Neg

ati

ve L

n D

elt

a

***

*** p < .001

Page 14: Discounting of Environmental Goods and Discounting in Social Contexts

Study 1: ResultsStudy 1: Results

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

$+ $- air+ air- transit+ garbage-

Scenario

Me

an

Neg

ati

ve L

n D

elt

a

*** ***

*** p < .001

Page 15: Discounting of Environmental Goods and Discounting in Social Contexts

Study 1: ResultsStudy 1: Results

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

$+ $- air+ air- transit+ garbage-

Scenario

Me

an

Neg

ati

ve L

n D

elt

a

*** *** ***

*** p < .001

Page 16: Discounting of Environmental Goods and Discounting in Social Contexts

Study 2: ResultsStudy 2: Results

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

$+ $- air+ air- health+ health-

Scenario

Me

an

Neg

ati

ve L

n D

elt

a

Page 17: Discounting of Environmental Goods and Discounting in Social Contexts

Study 2: ResultsStudy 2: Results

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

$+ $- air+ air- health+ health-

Scenario

Me

an

Neg

ati

ve L

n D

elt

a

*** p < .001

***

Page 18: Discounting of Environmental Goods and Discounting in Social Contexts

Study 2: ResultsStudy 2: Results

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

$+ $- air+ air- health+ health-

Scenario

Me

an

Neg

ati

ve L

n D

elt

a

*** p < .001

*** ***

Page 19: Discounting of Environmental Goods and Discounting in Social Contexts

Study 2: ResultsStudy 2: Results

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

$+ $- air+ air- health+ health-

Scenario

Me

an

Neg

ati

ve L

n D

elt

a

*** *** ***

*** p < .001

Page 20: Discounting of Environmental Goods and Discounting in Social Contexts

Study 2: ResultsStudy 2: Results

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

$+ $- air+ air- health+ health-

Scenario

Me

an

Neg

ati

ve L

n D

elt

a

** p < .01*** p < .001

** ***

Page 21: Discounting of Environmental Goods and Discounting in Social Contexts

Study 2: ResultsStudy 2: Results

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

$+ $- air+ air- health+ health-

Scenario

Me

an

Neg

ati

ve L

n D

elt

a

** p < .01*** p < .001

** ***

** **

Page 22: Discounting of Environmental Goods and Discounting in Social Contexts

Study 2: Discount Study 2: Discount CorrelationsCorrelations

$ +$ + $ -$ - Air +Air + Air -Air - Health Health ++

Health -Health -

$ +$ +

$ - $ - -.04-.04

Air +Air + .39.39****** -.03-.03

Air -Air - -.01-.01 .09.09 .11.11

Health Health ++

.39.39****** -.15-.15 .39.39****** .04.04

Health -Health - -.14-.14 .269.269**** -.13-.13 .03.03 -.07-.07

** = p < .01, *** *** = p < .001

Page 23: Discounting of Environmental Goods and Discounting in Social Contexts

Study 2: Discount Study 2: Discount CorrelationsCorrelations

$ +$ + $ -$ - Air +Air + Air -Air - Health Health ++

Health -Health -

$ +$ +

$ - $ - -.04-.04

Air +Air + .39.39****** -.03-.03

Air -Air - -.01-.01 .09.09 .11.11

Health Health ++

.39.39****** -.15-.15 .39.39****** .04.04

Health -Health - -.14-.14 .269.269**** -.13-.13 .03.03 -.07-.07

** = p < .01, *** *** = p < .001

Page 24: Discounting of Environmental Goods and Discounting in Social Contexts

Study 2: Discount Study 2: Discount CorrelationsCorrelations

$ +$ + $ -$ - Air +Air + Air -Air - Health Health ++

Health -Health -

$ +$ +

$ - $ - -.04-.04

Air +Air + .39.39****** -.03-.03

Air -Air - -.01-.01 .09.09 .11.11

Health Health ++

.39.39****** -.15-.15 .39.39****** .04.04

Health -Health - -.14-.14 .269.269**** -.13-.13 .03.03 -.07-.07

** = p < .01, *** *** = p < .001

Page 25: Discounting of Environmental Goods and Discounting in Social Contexts

Study 2: Discount Study 2: Discount CorrelationsCorrelations

$ +$ + $ -$ - Air +Air + Air -Air - Health Health ++

Health -Health -

$ +$ +

$ - $ - -.04-.04

Air +Air + .39.39****** -.03-.03

Air -Air - -.01-.01 .09.09 .11.11

Health Health ++

.39.39****** -.15-.15 .39.39****** .04.04

Health -Health - -.14-.14 .269.269**** -.13-.13 .03.03 -.07-.07

** = p < .01, *** *** = p < .001

Page 26: Discounting of Environmental Goods and Discounting in Social Contexts

DiscussionDiscussion

► When equalizing as many factors as When equalizing as many factors as possible, environmental outcomes possible, environmental outcomes discounted similarly to monetary outcomesdiscounted similarly to monetary outcomes

► Interpretation: Participants applied their Interpretation: Participants applied their strategies for monetary choices to the strategies for monetary choices to the environmental situationsenvironmental situations

► Gain/loss framing effects much more Gain/loss framing effects much more important than domain/topicimportant than domain/topic

► Discount rates constructed based on Discount rates constructed based on contextual featurescontextual features

Page 27: Discounting of Environmental Goods and Discounting in Social Contexts

Intertemporal Choice Intertemporal Choice Predecided vs. Naïve Groups Predecided vs. Naïve Groups

► Participants: 3-person groupsParticipants: 3-person groups Drawn from campus clubs, organizations, & officesDrawn from campus clubs, organizations, & offices N = 33N = 33 2 conditions: predecided vs. naïve2 conditions: predecided vs. naïve

► Task: decide whether to accept small additional $ Task: decide whether to accept small additional $ today or to wait for larger sum to be delivered in 3 today or to wait for larger sum to be delivered in 3 monthsmonths Split evenly among group membersSplit evenly among group members Group decision bindingGroup decision binding

► Frame: delay vs. accelerateFrame: delay vs. accelerate Delay: $65 today or more in 3 months (up to $120)Delay: $65 today or more in 3 months (up to $120) Accelerate: $75 in 3 months or smaller amount today (as Accelerate: $75 in 3 months or smaller amount today (as

low as $20)low as $20)

Page 28: Discounting of Environmental Goods and Discounting in Social Contexts

Intertemporal ChoiceIntertemporal Choice

You have won a You have won a $65$65 ($75)($75) check check which will be divided evenly among which will be divided evenly among the people in your group and given to the people in your group and given to each of you each of you at the end of this at the end of this experimentexperiment (in 3 months)(in 3 months). However, . However, you could receive a you could receive a largerlarger amount 3 amount 3 months from todaymonths from today ((smallersmaller amount amount today)today)..

Page 29: Discounting of Environmental Goods and Discounting in Social Contexts

Prize Money TaskPrize Money Task

► $65$65TodayToday

► ??????In Three MonthsIn Three Months

Remember that the amount of the money that Remember that the amount of the money that you you receive receive todaytoday is is $65$65. How large would the . How large would the amount of money in the second envelope (that amount of money in the second envelope (that you would receive in 3 months) have to be you would receive in 3 months) have to be before you would prefer the second envelope? before you would prefer the second envelope?

Page 30: Discounting of Environmental Goods and Discounting in Social Contexts

Discounting by Frame & Discounting by Frame & ConditionCondition

0

0.2

0.4

0.6

0.8

1

1.2

1.4

individuals predecided naïve

Mea

n N

egat

ive

Ln

(D

isco

un

t F

acto

r)

delay

accelerate*

* p < .05

Page 31: Discounting of Environmental Goods and Discounting in Social Contexts

Thanks to...Thanks to...

►Elke Weber & Dave KrantzElke Weber & Dave Krantz►The CRED & PAM labsThe CRED & PAM labs►The Center for the Decision SciencesThe Center for the Decision Sciences►The National Science FoundationThe National Science Foundation►Research Assistants: Aleksandra Research Assistants: Aleksandra

Petrović,Petrović,Tara Wedin, & Jill ColvinTara Wedin, & Jill Colvin

Page 32: Discounting of Environmental Goods and Discounting in Social Contexts

Thank You!Thank You!

Page 33: Discounting of Environmental Goods and Discounting in Social Contexts

ReferencesReferences

Chapman, G. B. (1996). Temporal Chapman, G. B. (1996). Temporal Discounting and Utility for Health and Discounting and Utility for Health and Money. Money. Journal of Experimental Journal of Experimental Psychology: Learning, Memory, and Psychology: Learning, Memory, and Cognition, 22,Cognition, 22, 771-791 771-791