Path Dependency in the Discounting of Delayed and Probabilistic Gains and Losses

The effect of risk on intertemporal choice and preference reversal

Two experiments examined the effect of risk on waiting preference and temporal preference reversal. Participants made binary choices between smaller-sooner (SS) and larger-later (LL) options following a 2 (time: immediate choices vs. non-immediate choices) x 4 (risk condition) within-subjects design. Risk conditions varied in whether the SS and/or the LL was risky or certain. Experiment 1 focused on choices with small magnitudes of payoffs and delays, whereas Experiment 2 focused on large magnitudes. Both experiments showed that making one option risky increased preference for the other option, whereas making both options risky had no impact on waiting preference. Pooling risk conditions together, participants in both experiments demonstrated temporal preference reversal. However, participants showed preference reversal in all 4 risk conditions in Experiment 2, but only in the risky (SS)-certain (LL) and risky-risky conditions in Experiment 1. This finding indicates for uncertain outcomes, people were at least equally (if not more) likely to reverse their choices, compared to certain outcomes.