CULTURED MINDS

TEMPORAL DISCOUNTING

 

The tendency for people to weigh present events/rewards more heavily than future ones is called temporal discounting (Frederick, Loewenstein & O'Donoghue, 2002). Experiments in the US have shown that

Most people prefer to receive £100 now over £110 in a month’s time 

Despite the gap being still one month, people’s preference for receiving £100 a week from now versus £110 a month and one week from now is different to their preference for receiving £100 a year from now versus £110 a year and one month from now (Laibson, 1997).  

 

 

Regulatory Focus and Uncertainty Avoidance 

There are strong links between regulatory focus, uncertainty avoidance and temporal discounting.  For American consumers “once rewards are very distant in time, they cease to be valuable” (BE Guide, 2014). However, through a 45-country study researchers discerned that the discounting effect is weaker in countries with low Uncertainty Avoidance and a Long Term Orientation (Wang, Rieger & Hens, 2011). And when a reward is incongruent with the individuals’ regulatory orientation (e.g a prevention-focused loss such as ‘delay in receiving…’ for a promotion-focused person), they act less impatient than when the reward is congruent with their regulatory orientation (Chen, Ng & Rao, 2005).

 

 

Analytic/Holistic Perception

(Takahashi, Hadzibeganovic, Cannas, Makino, Fukui & Kitayama, 2008) suggest that analytic and holistic styles of thinking explain some cross-cultural variance in temporal discounting. They argue that when people focus their attention on temporal segments in the future ( a more”analytic” temporal perception), biased temporal discounting is more likely. A “narrower allocation of attention is associated with more impulsive and inconsistent temporal discounting behaviour.” This is less common in people who view the future as a whole (a more”holistic” temporal perception).

 

 

Collectivism/Individualism and GDP

Studies have also linked collectivism to reduced temporal discounting (increased patience) and elevated risk-taking. This is usually explained by cushion hypothesis - since collectivists tend to have more loyal/cohesive groups, their groups provide a ‘cushion’ (safety net) allowing individuals to take risk or wait for long-term payoffs (Hsee & Weber 1998; 1999). But results have been mixed. Although some studies (Mahajna, Benzion, Bogaire & Shavitt, 2008; Mandel, 2003) support the cushion hypothesis, the 45 country study mentioned above found no evidence of the expected interaction between individualism and temporal discounting. But the authors do note that a country’s GDP influences time discounting (people from richer countries are more willing wait).