Asymmetric Discounting of Gains and Losses: A Query Theory Account

Journal of Risk and Uncertainty, Vol. 43, pp. 107-126, 2001

42 Pages Posted: 10 Sep 2011  

Kirstin C. Appelt

University of British Columbia (UBC) - Sauder School of Business; Columbia University

David J. Hardisty

Sauder School of Business

Elke U. Weber

Columbia Business School - Management & Psychology

Date Written: 2011

Abstract

People discount delayed gains (where the default is to receive a smaller gain sooner) more than accelerated gains (where the default is to receive a larger gain later). For losses, the pattern is reversed – people discount delayed losses less than accelerated losses. In Study 1, confirming a Query Theory process account, these effects are driven by the clustering of queries for arguments supporting the two choice options and the resulting number of thoughts in favor of the default option. Specifically, thoughts in favor of the smaller, sooner amount are more prominent in delay scenarios than acceleration scenarios for both gains and losses. This mediates the effect of direction (delay vs. acceleration) on discounting for gains and losses, with the prominence of thoughts in favor of the smaller, sooner amount increasing discounting for gains and decreasing discounting for losses. Study 2 confirms the causal role of the order in which options are considered. Participants asked to consider thoughts in the natural order (listing thoughts in favor of the default first) replicate the sign (gain vs. loss) by direction interaction found in Study 1. Participants asked to consider thoughts in the opposite, unnatural order (listing thoughts in favor of the alternative first) do not show differences in discounting between delay and acceleration for gains or for losses. In other words, reversing the order in which options are considered eliminates the sign by direction interaction. These results suggest interventions for intertemporal choice dilemmas in domains from personal finance to health to environmental conservation.

Keywords: Intertemporal Choice, Discounting, Losses, Constructed Preference, Query Theory

Suggested Citation

Appelt, Kirstin C. and Hardisty, David J. and Weber, Elke U., Asymmetric Discounting of Gains and Losses: A Query Theory Account (2011). Journal of Risk and Uncertainty, Vol. 43, pp. 107-126, 2001. Available at SSRN: https://ssrn.com/abstract=1925022

Kirstin C. Appelt (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

HOME PAGE: http://www.kirstinappelt.com

David J. Hardisty

Sauder School of Business ( email )

Canada
604-827-3158 (Phone)

HOME PAGE: http://www.sauder.ubc.ca/Faculty/People/Faculty_Members/Hardisty_David

Elke U. Weber

Columbia Business School - Management & Psychology ( email )

3022 Broadway
New York, NY 10027
United States

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