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The Sign Effect in Past and Future Discounting.
Sarah Molouki1, David J Hardisty2, Eugene M Caruso3
1Booth School of Business, The University of Chicago.
Psychological Science
|November 2, 2019
Summary
People discount future gains more than losses, a tendency stronger than for past events. This difference in discounting is linked to distinct emotions experienced when contemplating future versus past events.
Area of Science:
- Behavioral Economics
- Cognitive Psychology
- Decision Making
Background:
- Individuals often discount future outcomes, valuing present rewards more.
- The 'sign effect' describes a greater discounting of gains compared to losses.
- Tense (future vs. past) may influence how people value events.
Purpose of the Study:
- To compare discounting of positive and negative events in the future versus the past.
- To investigate the role of 'contemplation emotion' in temporal discounting differences.
- To identify and rule out alternative explanations for observed discounting patterns.
Main Methods:
- Six studies involving 1,077 participants.
- Assessment of participants' emotions during anticipation and remembrance of events.
- Comparison of discounting rates for future and past gains and losses.
Main Results:
- The 'sign effect' (discounting gains more than losses) was stronger for future outcomes than for past outcomes.
- Temporal discounting differences were significantly associated with distinct 'contemplation emotions'.
- Explanations like loss aversion, uncertainty, and self-connection did not account for the findings.
Conclusions:
- The tense of an event significantly influences the 'sign effect' in temporal discounting.
- Emotional responses during event contemplation are key to understanding why future and past events are discounted differently.
- Future-oriented emotions play a crucial role in the heightened discounting of future gains.
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