Many important problems -- including insufficient savings, unhealthy behavior, and depletion of environmental resources -- involve short-sighted tradeoffs between immediate and future costs and benefits. In general, people sharply discount future outcomes, leading them to want good things now and put bad things off until later. Recent advances in neuroeconomics have revealed the processes by which people discount future rewards, yet little is known about how people evaluate future losses, in spite of behavior evidence suggesting large differences. The proposed research will investigate how and why losses are discounted differently from gains.
Study research participants will make real choices between immediate and future gains and losses of varying amounts and delays. Meanwhile, their decision processes will be explored with behavioral methods, including thought listings, and neurological methods, including functional magnetic resonance imaging (fMRI). Thus, the project will investigate the reasons, emotions, and brain areas underlying discounting of losses.
By discovering the ways in which discounting of losses is fundamentally different from discounting of gains, the proposed research will inform scientific thinking about discounting in psychology, economics, neuroscience, and related fields. Its applications should improve intertemporal decision making about losses, benefiting both individuals and society. Furthermore, this project will support advanced graduate training in psychology and neuroeconomics, preparing future researchers with cutting edge methods
for NSF award 1024599 People are constantly faced with choices about what to have now, and what to put off until later. Many important problems – such as credit card debt, smoking, obesity, and environmental destruction – can be traced to people's tendency to discount the future consequences of their actions. The vast majority of previous research on intertemporal choice has examined people's decisions about hypothetical gains, in spite of the fact that many real-world outcomes of interest involve future losses. The present research project investigated how people make tradeoffs between both immediate vs future gains, and immediate vs future losses. For example, how do people decide when faced with a choice such as "receive $90 now or $92 a month from now," or "lose $90 now or $92 a month from now"? This project studied both an online, national sample as well as an in-person, student sample, using a combination of experimental psychology, behavioral economics and functional magnetic resonance imaging (fMRI). One important result of this research is that people made very similar choices no matter whether the gains and losses were real or hypothetical. This is great news for other research projects, because real intertemporal losses are logistically quite difficult to study in experimental settings. Another important result is that people showed very different time preferences for gains and losses. Furthermore, contextual factors – such as the default date of receiving an outcome or the magnitude of outcomes – had different effects on people's time preferences for gains and losses. Analysis of the fMRI data is ongoing, but preliminary analysis suggests that intertemporal choice for gains (relative to losses) is driven more by the ventral medial prefrontal cortex and the hippocampus, while intertemporal choice for losses is driven more by the orbitofronal cortex, amygdala and habenula. This grant research was also used as an opportunity for training graduate students in neuroscience methods and analysis.
