Chapter 3: Risk Factors: Relevance and Problems for Measurement
Hence, these preferences can be tested by offering large rewards at the price of waiting a set amount of time and observing if individuals behave less impatiently (i.e. if they choose to wait). A recent experiment that tested for the presence of hyperbolic discounting was carried out among students at Rutgers University and New York University in 2002 and 2003 (Sopher and Sheth 2006). The questionnaire included forty questions, and for each qeustion the students had to choose between an earlier and a later monetary payment (determined by applying a constant compounding rate to a base amount). Students were told that at the end of the experiment one of the forty options would be randomly chosen and that would be their actual payment. Payments ranged from $8 to $40 and some of them included a time delay (of at most 8 weeks). In those cases, students were required to return to the same room to collect it on the appointed day. The questions were designed to vary the base amount (8000 or 20,000 francs), the compounding rate (low, medium, or high), the initial time (today or in 2 weeks) and the time delay between choices (2, 4, or 6 weeks). In addition, individuals were randomized to take either a low-rate questionnaire (with compounding rates of 0.1, 0.5, and 1% per week) or the high-rate questionnaire (with compounding rates of 1, 5, and 10% per week).
Box 4: Sample Questions from Shopher and Sheth (2006)
Higher-Rates Questionnaire 1. Which do you prefer, 8000 francs in 0 weeks, or 8161 francs in 2 weeks? 2. Which do you prefer, 8000 francs in 0 weeks, or 8325 francs in 4 weeks? 3. Which do you prefer, 8000 francs in 0 weeks, or 8492 francs in 6 weeks? 4. Which do you prefer, 8161 francs in 2 weeks, or 8325 francs in 4 weeks? 5. Which do you prefer, 8161 francs in 2 weeks, or 8492 francs in 6 weeks? Lower-Rates Questionnaire 1. Which do you prefer, 8000 francs in 0 weeks, or 8016 francs in 2 weeks? 2. Which do you prefer, 8000 francs in 0 weeks, or 8032 francs in 4 weeks? 3. Which do you prefer, 8000 francs in 0 weeks, or 8048 francs in 6 weeks? 4. Which do you prefer, 8016 francs in 2 weeks, or 8032 francs in 4 weeks? 5. Which do you prefer, 8016 francs in 2 weeks, or 8048 francs in 6 weeks?
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