The "mere token" effect

[ciphergoth]

Happened across a fascinating new cognitive bias today: the "mere token" effect. In summary:

• If you offer people a choice between $300 in a week or $900 in a year, 62% of respondents choose the $300 in a week.
• If you tell them that, immediately after they choose, you're going to give them $50, and then present them with the same choice, they make roughly the same decision.
• If you offer them a choice between $50 now and $300 in a week, or $50 now and $900 in a year, suddenly 52% of respondents choose the $900 in a year option.

Obviously there's no rational reason to make a different choice in the second and third scenarios, the options in both scenarios are really the same, but the difference in the way they are presented makes a huge difference to people's responses.

It's worth noting that hyperbolic discounting with intertemporal bargaining, the model presented in "Breakdown of Will" that I've enthused about before, completely fails to predict this phenomenon.

Scope Insensitivity and the "Mere Token" Effect, Oleg Urminsky, 2006.

Update: I've edited the second point above: it used to read "If you give them $50, and then present them with the same choice, they make roughly the same decision". This gives the misleading impression that there's some difference in substance between the second and third points, which resulted in some discussions below. I hope that with the new phrasing, it's clear that there is no real difference at all between the second and third scenario; it is exactly the same choice phrased in two different ways. Updated: trying yet again with phrasing of the second choice.

Comments

[djm4]

That's definitely the clearest explanation of it!

Yes it is, but there's problem. It's not what the study tested. The percentages from the study ciphergoth quotes don't directly relate to the second and third options. It may be the case that if the experimenters had done the research that ciphergoth suggests, they'd have got the percentages he states, but the study itself doesn't state that.

For a start, the $50 was not offered 'now' or 'as soon as you've pressed OK'. Additionally, it wasn't always $50. In option three it was offered in three days (page 12 of the paper). In option 2 $100 (not $50) was offered as a separate reward, but still in three days (page 15 of the paper). This was not an instant reward. Whether or not that changes the results is a matter for conjecture, but it still means that the situation wasn't as ciphergoth presents it. Personally, I think a reward offered in three days is a conceptually different thing from one offered instantly.

That said, if you only look at 1c and don't mix in the results from the earlier survey, I think ciphergoth is right that options 2 and 3 are logically identical, but for some reason aren't seen as such by the participants. And I think there results do still need explaining. So in a sense, I'm quibbling, but I'm a stickler for accuracy in reporting, especially when what's being reported is a counter-intuitive result that appears to show people behaving irrationally.

Here, as best I can present them, are the options from 1c of the paper (pages 15 & 16), where at least the quantities of money are consistent, so the results should be directly comparable. Please check my working with the original paper - if ciphergoth can slip up in reporting the results, so can I:

Option 1:

Choose between:

* $300 in a week
* $1000 in a year

37% choose $300; 63% choose $1000.

Option 2:

Choose between:

* $100 in three days and $300 in a week
* $100 in three days and $1000 in a year

27% choose $300; 73% choose $1000.

Option 3:

First, agree to receive $100 in three days. Then choose between:

* $300 in a week
* $1000 in a year

33% choose $300; 67% choose $1000

Note that the study includes z- and p-values for the results, but my statistics is too rusty to be certain I'm interpreting them correctly. If anyone else would like to check the original paper and report, I'd be grateful.

And, just to reiterate, I agree that options 2 and 3 are, on the face of it, logically identical but presented differently, and that the fact that people do choose differently between the two options is unexpected and worthy of investigation.