Preference reversals with losses.

Abstract

People who prefer larger, later gains over smaller, sooner gains when considering outcomes far in the future often reverse their preference as the alternatives become closer in time. This finding, which is contrary to a normative economic account of intertemporal choice, has been interpreted as support for hyperboloid discounting, but the results can also be explained by steeper discounting of smaller amounts. The present study is the first to demonstrate that analogous preference reversals occur with losses: People who preferred a smaller, sooner loss over a larger, later loss when the outcomes were far in the future reversed their preference when these alternatives were closer in time. Because there was no magnitude effect (i.e., smaller losses were not discounted more steeply than larger losses), the present findings strongly support the proposition that reversals in preference between delayed outcomes occur because of the hyperboloid shape of the discounting function.

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@article{Holt2008PreferenceRW, title={Preference reversals with losses.}, author={Daniel D. Holt and Leonard Green and J. Myerson and Sara J. Estle}, journal={Psychonomic bulletin & review}, year={2008}, volume={15 1}, pages={89-95} }