Discounting of Environmental Goods and Discounting in Social Contexts

1
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

2
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

3
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

4
Experimental Overview

• 2 Studies
• 184 US residents, recruited run online
• Within subjects designs
• Hypothetical monetary, environmental health
  scenarios
• DV transformed discount factor, -lnd

5
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.

6
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 optionsA.
  Win 250 immediately.B. Win one year
  from now.

7
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 optionsA.
  Win 250 immediately.B. Win 380 one year from
  now.

8
Monetary Loss Scenario

• Imagine you just got a parking fine for 250

9
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

10
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 optionsA.
Improved air quality immediately, for 21 days.B.
Improved air quality one year from now, for ____
days.
11
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)

12
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
13
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 lt .001
Scenario
14
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 lt .001
Scenario
15
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 lt .001
Scenario
16
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
17
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 lt .001
Scenario
18
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 lt .001
Scenario
19
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 lt .001
Scenario
20
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 lt .01 p lt .001
Scenario
21
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 lt .01 p lt .001
Scenario
22
Study 2 Discount Correlations
p lt .01, p lt .001
23
Study 2 Discount Correlations
p lt .01, p lt .001
24
Study 2 Discount Correlations
p lt .01, p lt .001
25
Study 2 Discount Correlations
p lt .01, p lt .001
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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

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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)

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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).

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Prize Money Task

• 65Today

• ???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?

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Discounting by Frame Condition

p lt .05
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Thanks to...

• Elke Weber Dave Krantz
• The CRED PAM labs
• The Center for the Decision Sciences
• The National Science Foundation
• Research Assistants Aleksandra Petrovic,
• Tara Wedin, Jill Colvin

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Thank You!
33
References

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