Friday, November 16, 2012

The Financial Cost of Sadness

It's not immediately clear how negative feelings should impact on the tendency to seek immediate rather than delayed rewards. One perspective is that reward insensitivity is a characteristic of depression that may lead those with the condition not to seek out rewarding stimuli (whether in the form of activities or in spending money). Sadness has also been linked to closer more systematic evaluation of details of choice/of a task. Both of these ideas would suggest that sadness could reduce levels of discounting. However, there is also a literature describing how negative feelings can impair self-control in the paper below Lerner and Weber suggest that sadness induces feelings of loss and the tendency to quickly seek out reward, even if this is risky. This explanation appears to be more of a corrective response mechanism rather than a tendency that would characterize those suffering from psychological distress more generally. And this is what the authors found, participants were far less likely to wait for a reward when a sad mood had been induced (accepting 13-34% less money in this instance).

The authors do not mention the role of belief about moods in determining the pattern of results observed. One interesting idea following from this paper is that this response to sadness could potentially be augmented if people were led to believe their negative feelings were frozen and not amenable to change by immediate gratification (see Tice et al. (2001): "if you feel bad, do it") . This intervention may effectively break or at least attenuate the link between sadness and discounting.

This aside, as the authors note, this study is important as there is a substantial gap in the literature with no published studies (according to the authors) examining the impact of negative feelings on time preferences.

The Financial Cost of Sadness

"We hypothesized a phenomenon that we term myopic misery. According to our hypothesis, sadness increases impatience and creates a myopic focus on obtaining money immediately instead of later. This focus, in turn, increases intertemporal
discount rates and thereby produces substantial financial costs. In three experiments, we randomly assigned participants to sad- and neutral-state conditions, and then offered intertemporal choices. Disgust served as a comparison condition in Experiments 1 and 2. Sadness significantly increased impatience: Relative to median neutral-state participants, median sad state participants accepted 13% to 34% less money immediately to avoid waiting 3 months for payment. In Experiment 2, impatient thoughts mediated the effects. Experiment 3 revealed that sadness made people more present biased (i.e., wanting something immediately), but not globally more impatient. Disgusted participants were not more impatient than neutral participants, and that lack of difference implies that the same financial effects do not arise from all negative emotions. These results show that myopic misery is a robust and potentially harmful phenomenon."

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