Effects of inflation on the subjective value of delayed and probabilistic rewards (original) (raw)

Abstract

In the years prior to 1994, there were very high rates of inflation in Poland, and the zloty depreciated relative to the U.S. dollar. However, the new zloty, introduced in 1995, was associated with greatly decreased rates of inflation and provided a more stable currency. We report a series of three experiments that take advantage of these changes to examine the effects of inflation on the subjective value of delayed and probabilistic rewards. Subjects were Polish citizens familiar with both zlotys and dollars. The first two experiments, conducted in 1994, used dollars and old zlotys, and the third experiment, conducted in 1996, used dollars and new zlotys. In all three experiments, the dollar and zloty rewards were of equivalent worth, according to the then current exchange rates. In Experiment 1, subjects chose between immediate and delayed rewards and, in Experiment 2, chose between certain and probabilistic rewards. The subjective value of a delayed reward was greater when its amount was specified in dollars than when it was specified in old zlotys. In contrast, the currency in which a reward was specified had no effect on the subjective value of probabilistic rewards. The results of these two experiments suggest a selective effect of inflation on decisions involving delayed rewards. This was verified in the third experiment, in which, using new zlotys, no differences in discounting were observed between the two currencies with either probabilistic or delayed rewards. Importantly, in all three experiments, the discounting of both delayed and probabilistic rewards was well described by the same simple mathematical model, suggesting that similar decision-making processes underlie both phenomena. However, the present results argue against a single-process theory in which the discounting of probabilistic rewards is derived from the discounting of delayed rewards.

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Authors and Affiliations

1. Faculty of Psychology, Warsaw University, Stawki 5/7, 00-183, Warsaw, Poland
   Pawel Ostaszewski
2. Department of Psychology, Washington University, Campus Box 1125, 63130, St. Louis, MO
   Leonard Green & Joel Myerson

Authors

1. Pawel Ostaszewski
2. Leonard Green
3. Joel Myerson

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Correspondence toLeonard Green.

Additional information

This research was supported in part by Grants BST 505/40 and 1 H01F 015 10 from the Scientific Research Committee (KBN), Poland, and by Grant R01 MH55308 from the National Institute of Mental Health. Pawel Ostaszewski was supported as a Visiting Scholar at Washington University by a fellowship from the Kosciuszko Foundation. Portions of this research were presented at the 1996 meeting of the Psychonomic Society in Chicago.

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Ostaszewski, P., Green, L. & Myerson, J. Effects of inflation on the subjective value of delayed and probabilistic rewards.Psychonomic Bulletin & Review 5, 324–333 (1998). https://doi.org/10.3758/BF03212959

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• Received: 18 July 1997
• Accepted: 04 November 1997
• Issue date: June 1998
• DOI: https://doi.org/10.3758/BF03212959

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