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TRADE‐OFFS IN CHOICE BETWEEN RISK AND DELAY DEPEND ON MONETARY AMOUNTS
Author(s) -
Christensen Joyce,
Parker Scott,
Silberberg Alan,
Hursh Steven
Publication year - 1998
Publication title -
journal of the experimental analysis of behavior
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.75
H-Index - 61
eISSN - 1938-3711
pISSN - 0022-5002
DOI - 10.1901/jeab.1998.69-123
Subject(s) - risk aversion (psychology) , receipt , economics , certainty , binary number , equivalence (formal languages) , monetary economics , econometrics , microeconomics , psychology , expected utility hypothesis , mathematical economics , mathematics , arithmetic , geometry , accounting , discrete mathematics
In Experiments 1 and 2, 25 and 48 college students made binary choices between hypothetical money amounts. In Part A, choices were between small amounts available with certainty and larger amounts ($10 to $10,000) available with risk. Choices in Part B were between immediate small amounts and delayed larger amounts. As money amount grew, risk aversion and delay aversion both changed but in opposite ways: Risk aversion grew but delay aversion shrank. Part C of Experiment 1 pitted risky amounts against delayed amounts, and its results were consistent with those of Parts A and B. Equivalences of particular risks and delays depended on the particular monetary amounts to which they attached. In Experiment 3, 20 college students made binary choices between money amounts, knowing that they would actually receive some of the selections they made. In Part A, choices were between certain small amounts and risky larger amounts ($1 and $10). Choice problems in Part B were between immediate small amounts and delayed receipt of $1 or $10. The results were like those of Experiment 1, though weaker. These results argue against models of choice that posit an equivalence of risk and delay that is independent of monetary amount.