Discounting Future Reward in an Uncertain World

Area of Science:

• Behavioral Economics
• Neuroeconomics
• Decision Science

Background:

• Humans often discount delayed rewards compared to immediate ones.
• Existing theories link discounting to the risk of reward non-materialization.
• The role of uncertainty in reward *magnitude* for delay discounting is less explored.

Purpose of the Study:

• To investigate how uncertainty in the magnitude of delayed rewards (volatility) influences delay discounting.
• To propose and test a model where discounting is proportional to reward volatility.
• To explore the neural mechanisms underlying volatility discounting.

Main Methods:

• Three experiments with 158 participants involving intertemporal choice tasks.
• Participants learned product price dynamics and chose selling times.
• Functional magnetic resonance imaging (fMRI) to assess brain activity and connectivity.

Main Results:

• Delay discounting increased with higher price volatility across experiments.
• The effect persisted over naturalistic delays up to 4 months.
• fMRI revealed decreased hippocampal-prefrontal coupling correlating with volatility.

Conclusions:

• Delay discounting is influenced by time-dependent uncertainty in reward magnitude (volatility).
• A novel model captures how discounting adapts to volatility, explaining individual differences in impatience.
• Neural findings suggest uncertainty impairs prospective simulation of future outcomes.