Temporal distance reduces the attractiveness of p-bets compared to $-bets |
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| Affiliation: | 1. Faculty of Economics and Business, University of Chile, Diagonal Paraguay 257, Santiago 6510015, Chile;2. Department of Management & Organizations, University of Arizona, P.O. Box 210108, Tucson, AZ 85721-0108, United States;1. Alfred Weber Institute, University of Heidelberg, Bergheimer Strasse 58, 69115 Heidelberg, Germany;2. Erasmus School of Economics, Erasmus University Rotterdam & Tinbergen Institute, PO Box 1738, 3000 DR Rotterdam, The Netherlands;1. School of Hospitality and Tourism Management, Purdue University, Marriott Hall, 900 W. State Street, West Lafayette, IN 47907-2115, USA;2. School of Hospitality and Tourism Management, Purdue University, Room 245, Marriott Hall, 900 W. State Street, West Lafayette, IN 47907-2115, USA;1. Department of Economics, University of Southampton, Southampton SO17 1BJ, United Kingdom;2. Department of Economics, Florida State University, 113 Collegiate Loop, Bellamy 288, Tallahassee, FL 32306, United Kingdom;3. Department of Economics, University of Minnesota, 1925 Fourth Str. S., 4-149 Hanson Hall, Minneapolis, MN 55455, United Kingdom |
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| Abstract: | Although people normally prefer a more certain option over a riskier option of equal expected value, sometimes they are tempted to choose the riskier, but more rewarding one. Such temptation is even stronger when people decide for the distant future as compared with the near future. In Experiments 1 and 2 we showed that increasing temporal distance makes people more likely to choose a high risk $-bet (€400, 0.02;0) over a low risk p-bet (€14, 0.60;0). Furthermore, the risk aversion shift increased proportionally to the time delay and persisted even for long delays (6 months). In Experiment 3, we showed that this temporal effect is associated with a decrease in positive feelings towards the p-bet, and with a decrease in the positive evaluation of the high-probability (60%) of the p-bet, but not with an increase of the positive evaluation of the high-payoff (400 euro) of the p-bet. In Experiment 4, we showed that increasing the salience of the probability feature tended to decrease the temporal effect, while increasing the salience of the prize did not vary the strength of the effect. Results are in line with an affect-based explanation of the temporal effect. |
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| Keywords: | Psychological distance Risk taking Probability |
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