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Temporal discounting of gains and losses of time: An experimental investigation

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Abstract

This paper investigates “asymmetries” between non-monetary gains and losses in intertemporal choice. We considered gains and losses of spare/working time with respect to a reference duration defined in a working contract. Specifically, we elicited a behavioral model of intertemporal choice that accounts for a gain/loss-dependent discounting function and a reference-dependent utility. Additionally, we did not impose preference for the present (positive discounting) and allowed for both decreasing and increasing impatience. While our results are standard regarding the discount of money (our baseline treatment), our subjects heavily discounted gains of time. More patience was observed for losses of time and a sizable portion of subjects even exhibited negative discounting, i.e. they preferred to expedite losses of time. Our econometric estimations also reveal a much larger heterogeneity of behavior in terms of both utility and discounting for gains and losses of spare time as compared to money.

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Notes

  1. Many researchers invoke the difficulty of recruiting volunteers to participate in an experiment in which they may lose money. Furthermore, the payment of a participation fee that covers the largest loss is only feasible when small amounts of money are involved.

  2. Impatience, resulting from a strictly decreasing discounting function, implies preference for the present.

  3. This specification fits our data better than the exponential one (Section B.3 in Online Appendix B).

  4. In order to avoid any confusion between the attribute time and the delay before receipt of the outcome, we will call delay-sensitivity the parameter \(\gamma \) of the constant-sensitivity discounting function instead of time-sensitivity (Ebert and Prelec 2007).

  5. The video is available upon request.

  6. We used the absolute values of the outcomes in the presentation of the choice lists.

  7. Δ was fixed at 60 minutes for both questions on gains of time and losses of time.

  8. The experiment included a fourth treatment: losses of money. Because of the difficulties to implement real losses of money, questions in this treatment were hypothetical. In this study, we focus on incentivized choices and do not report the treatment with hypothetical losses of money.

  9. A simpler (atemporal) approach was used by Abdellaoui and Kemel (2013b) and Kemel and Travers (2016) for decision under risk.

  10. Due to the temporal nature of outcomes and the fact that subjects were interviewed successively during a period of 2 weeks, we could not select the eligible subjects at the end of the experiment.

  11. We excluded choice lists \(CL_{10}\) to \(CL_{15}\) as they are designed to measure the utility parameter.

  12. Exponential (constant) discounting can always be retrieved from the specifications considered, when \(\gamma \) is fixed to a given value. For instance, the constant-sensitivity discounting function is equivalent to the exponential discounting function when \(\gamma = 1\).

  13. To illustrate this, an individual with a concave utility function for gains of time might prefer to gain 1 hour twice at two different periods of time than to gain 2 hours at one point of time. On the other hand, an individual with a convex utility function for gains of time may prefer to group the 2 hours in one gain at a single point of time.

  14. As an illustration, the present value \(c^{*}\) of the temporal prospect that offered a gain of time of 120 minutes six months from now (120,6) was greater than 120 for 20 subjects in our sample: these individuals did not exhibit preference for the present. By imposing preference for the present \((c\leq 120\) in this example), we would obtain “corner estimates” for these individuals as they would never switch and always prefer the option (120,6) rather than any option \((c,0)\).

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Acknowledgment

We are grateful to the Editor and an anonymous referee, as well as the participants of FUR (2016), INFORMS annual meeting (2015) and SPUDM (2015) for helpful comments. We also thank the Investissements d’Avenir (ANR-11-IDEX-0003/Labex Ecodec/ANR-11-LABX-0047) for supporting our research.

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Authors and Affiliations

  1. CNRS & HEC Paris, 1 rue de la Libération, 78350, Jouy-en-Josas, France

    Mohammed Abdellaoui & Emmanuel Kemel

  2. Department of Management & Technology, Bocconi University, via Roentgen 1, 20136, Milan, Italy

    Cédric Gutierrez

Authors
  1. Mohammed Abdellaoui
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  2. Cédric Gutierrez
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  3. Emmanuel Kemel
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Correspondence to Mohammed Abdellaoui.

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Appendix: Experimental design

Appendix: Experimental design

Fig. 9
figure 9

Visualization of Losses of Time

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Fig. 10
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Screenshot of a Validation Screen

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Abdellaoui, M., Gutierrez, C. & Kemel, E. Temporal discounting of gains and losses of time: An experimental investigation. J Risk Uncertain 57, 1–28 (2018). https://doi.org/10.1007/s11166-018-9287-1

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  • DOI: https://doi.org/10.1007/s11166-018-9287-1

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