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

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. 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 fill in the number that would make you indifferent between the following two options: A. Win $250 immediately. B. Win $ one year from now. ► Please choose which option you prefer in each pair: [ ] 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

Indifference Point Elicitation ► 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. [ ] 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 choose which option you prefer in each pair:

Monetary Loss Scenario Imagine you just got a parking fine for $250 … 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: [ ] 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 $+$-air+air-transit+garbage- Scenario Mean Negative Ln Delta

Study 1: Results $+$-air+air-transit+garbage- Scenario Mean Negative Ln Delta *** *** p <.001

Study 1: Results $+$-air+air-transit+garbage- Scenario Mean Negative Ln Delta *** *** p <.001

Study 1: Results $+$-air+air-transit+garbage- Scenario Mean Negative Ln Delta *** *** p <.001

Study 2: Results $+$-air+air-health+health- Scenario Mean Negative Ln Delta

Study 2: Results $+$-air+air-health+health- Scenario Mean Negative Ln Delta *** p <.001 ***

Study 2: Results $+$-air+air-health+health- Scenario Mean Negative Ln Delta *** p <.001 ***

Study 2: Results $+$-air+air-health+health- Scenario Mean Negative Ln Delta *** *** p <.001

Study 2: Results $+$-air+air-health+health- Scenario Mean Negative Ln Delta ** p <.01 *** p <.001 ** ***

Study 2: Results $+$-air+air-health+health- Scenario Mean Negative Ln Delta ** p <.01 *** p <.001 ** *** **

Study 2: Discount Correlations $ + $ - Air + Air - Health + Health - $ + $ Air +.39 *** -.03 Air Health +.39 *** Health ** *** ** = p <.01, *** = p <.001

Study 2: Discount Correlations $ + $ - Air + Air - Health + Health - $ + $ Air +.39 *** -.03 Air Health +.39 *** Health ** *** ** = p <.01, *** = p <.001

Study 2: Discount Correlations $ + $ - Air + Air - Health + Health - $ + $ Air +.39 *** -.03 Air Health +.39 *** Health ** *** ** = p <.01, *** = p <.001

Study 2: Discount Correlations $ + $ - Air + Air - Health + Health - $ + $ Air +.39 *** -.03 Air Health +.39 *** Health ** *** ** = 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?

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,