Time preferences and risk aversion: tests on domain differences

The design and evaluation of environmental policy requires the incorporation of time and risk elements as many environmental outcomes extend over long time periods and involve a large degree of uncertainty. Understanding how individuals discount and evaluate risks with respect to environmental outcomes is a prime component in designing effective environmental policy to address issues of environmental sustainability, such as climate change. Our objective in this study is to investigate whether subjects' time preferences and risk aversion across the monetary domain and the environmental domain differ. Crucially, our experimental design is incentivized: in the monetary domain, time preferences and risk aversion are elicited with real monetary payoffs, whereas in the environmental domain, we elicit time preferences and risk aversion using real (bee-friendly) plants. We find that subjects' time preferences are not significantly different across the monetary and environmental domains. In contrast, subjects' risk aversion is significantly different across the two domains. More specifically, subjects (men and women) exhibit a higher degree of risk aversion in the environmental domain relative to the monetary domain. Finally, we corroborate earlier results, which document that women are more risk averse than men in the monetary domain. We show this finding to, also, hold in the environmental domain

Intertemporal decision making studies on the working of Myopia - 1999

This study deals with questions concerning decision making, and rational choices. It was first investigated when people are more likely to be driven by their short-term interests and hence neglect future consequences. Second, it was investigated which people are most likely to take long-term consequences of their immediate actions into account. Finally, the question was considered whether and how behavioral regularities observed in intertemporal choice can be generalized to other choice domains where people have to make similar tradeoffs

Intertemporal decision making studies on the working of Myopia - 1999

This study deals with questions concerning decision making, and rational choices. It was first investigated when people are more likely to be driven by their short-term interests and hence neglect future consequences. Second, it was investigated which people are most likely to take long-term consequences of their immediate actions into account. Finally, the question was considered whether and how behavioral regularities observed in intertemporal choice can be generalized to other choice domains where people have to make similar tradeoffs

Hyperbolic Discounting with Environmental Outcomes across Time, Space, and Probability

Environmental discounting is a potentially important research area for climate change mitigation. We aimed to replicate and extend earlier work on the discounting of a negative environmental outcome. We measured ratings of concern, and willingness to act to mitigate, an outcome involving air pollution that would hypothetically affect the garden and drinking water of the participants over psychological distance represented by temporal (1 month, 6 months, and 1, 3, 5, 10, and 80 years), spatial (5, 20, 50, 100, 1000, and 5000 km), and probabilistic (95%, 90%, 50%, 30%, 10%, and 5% likelihood) dimensions. For our data from 224 first-year psychology students, of four potential models (an exponential, simple hyperbolic, and two hyperboloid functions), the Rachlin hyperboloid was the best-fitting model describing ratings of concern and action across all three dimensions. Willingness to act was discounted more steeply than concern across all dimensions. There was little difference in discounting for outcomes described as human-caused rather than natural, except that willingness to act was discounted more steeply than concern for human-caused environmental outcomes compared to natural outcomes across spatial (and, less conclusively, temporal) distance. Presenting values of the three dimensions in random or progressive order had little effect on the results. Our results reflect the often-reported attitudebehavior gap whereby people maintain concern about a negative event over dimensions of psychological distance, but their willingness to act to mitigate the event is lower and more steeply discounted