Framing Effects in Riskless Decisions: Discounting of Temporally Delayed Outcomes

Abstract

Studies of riskless choice in both cognitive (Stevenson, 1986) and behavioral paradigms (Chung & Herrnstein, 1967) have found that subjects prefer temporally delayed losses and temporally advanced gains. Analogously, studies of risky choice have found that subjects prefer risky losses and certain gains (Tversky & Kahneman, 1981). Because probability is conceptually identical to the inverse of delay, it was recently suggested that these findings were descriptions of the same choice process (Rachlin, Logue, Gibbon, & Frankel, 1986). There were two goals of the present investigation. The first was to replicate and extend, through the use of a withinsubjects design, the finding that subjects prefer delayed gains and immediate losses. The second was to test the applicability of the prospect theory value function in a choice context involving temporally delayed financial options. Subjects showed strong preferences for immediate gains and delayed losses, but there was not support for the prospect theory value function in a riskless context involving temporal delays.

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