As April 15 rolls around, money is on most people’s minds — whether delaying filing taxes or anxiously awaiting a refund. After all, as many have said: Money changes everything.
Now, psychologists have published research that supports that claim.
Studying delayed gratification and risk, researchers found that people are more willing to wait for full monetary rewards than they are consumable rewards, namely, beer, candy and soda.
The findings, published in a recent edition of Psychological Science, have far-reaching implications for many fields, including marketing, economics and the psychology of self-control.
Leonard S. Green, Ph.D., professor of psychology in Arts & Sciences, and Joel Myerson, Ph.D., research professor of psychology, along with their graduate students, Daniel D. Holt and Sara J. Estle, studied the effect that delay of a reward has on the subjective value of that reward.
Their research looked at factors that affect the degree of self-control people exercise, both those that increase self-control and those that increase impulsive decision-making.
The researchers found that people more steeply discount delayed consumable rewards, such as soda, than delayed monetary rewards.
For example, given the choice between an amount of soda right away and $50 worth of soda in six months, most people would take the soda now, even if it were significantly less than $50 worth. In doing so, they discount the delayed reward.
By contrast, given a choice between an amount of money right now and $50 in six months, most people would not discount the delayed money nearly as much as the soda.
Delayed money was discounted less steeply than beer, candy and soda. Those three consumable products all were discounted at approximately the same rate, Green and Myerson found.
So what makes money different from directly consumable goods?
“Money retains its utility despite the inconstancy of desire,” Green said. “Money can be exchanged for almost any other reward that one might want, but the desire for beer, candy or soda is dependent upon a number of factors that vary over time: hunger, thirst, etc.”
Thus, the average person exercises more self-control in waiting for a monetary reward because money is always useful, while we have “inconstant desire” for things like beer, candy and soda.
However, the researchers found no difference in the rates at which all the types of rewards — money, candy, soda and beer — are discounted if the rewards are probabilistic, meaning there is only a chance that one will get the reward (say, a 50 percent chance).
So, although delayed rewards and probabilistic rewards may seem similar as far as “risk,” the way people think about their choices is different.
In addition, while previous researchers claimed that abused substances, such as alcohol, have an inherent quality that makes them steeply discounted, this research suggests that abused substances may be discounted at the same rate as other directly consumables, at least by people without substance-abuse problems.
The research helps clarify factors that influence choices involving retirement plans, certificates of deposit and others, as well as aiding in identifying weaknesses in the decision-making processes.
The researchers suggest that such understanding may enable people to make better choices — those that lead to greater benefits in the long run.