Making the payoff (look) worth the wait

If you are like most people, you are impatient. You’ll take a small reward now over a larger reward in the future. The near future. You’ll pick $5 today over $6.20 in 26 days. That’s a 25 percent return in a month! But most people take the $5 now because they focus on the $1.20 difference, which is much less than $5. Psychologists consider this an example of framing. In the language of Nudge, a choice architect’s choice of frame affects individuals’ final choices. In this month’s Psychological Science, Eran Magen, Carol Dweck, and James Gross have a short paper that puts a twist on the common finding of human impatience with a laboratory experiment. They frame the today-next month choice in way that increases the likelihood that someone will pick the delayed payoff.

They introduce an element of uncertainty in the decision making process. Some participants in their experiment faced the standard choice described above. Magen, Dweck, and Gross call this the “hidden zero” format. Others were given the option to receive “[A] $5.00 today and $0 in 26 days OR [B] $0 today and $6.20 in 26 days.” The amounts of money are the same in each of these situations. All that is different is the introduction of a 0 – what the authors call the “explicit zero” format – that reframes the gains and losses associated with waiting.

Despite the fact that the hidden-zero and explicit-zero formats of presentation were logically equivalent, the latter resulted in lower rates of impulsive choice, possibly because the explicit-zero format caused each choice to appear as a sequence, thereby encouraging people to select the improving sequence (i.e., the larger, later reward). The explicit-zero format may also draw attention to the opportunity cost of each choice, thereby encouraging people to choose the alternative that incurs a lower opportunity cost (i.e., to forgo the smaller, sooner reward)…

The way alternatives are represented matters: By simply mentioning the “obvious” downsides of alternatives, one can help decision makers choose in a more informed and balanced manner, thereby helping them place more weight on the achievement of their long-term goals, rather than on immediate gratification.

Hat tip: (We’re Only Human)

Tags:

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: