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Lab Report #4: Alice Bertella 28/10/2016

The document summarizes a lab report on an experiment about intertemporal choices. 50 students were asked to choose between immediate or delayed monetary rewards over different time periods. The results were analyzed by creating tables and graphs showing the fraction of students who chose immediate rewards and the implicit interest rates associated with their choices. It was found that most students preferred immediate rewards when the interest rate was 0%, but preferred delayed larger rewards when interest rates were above around 20%. The results also showed common switching points from immediate to delayed rewards around certain reward amounts, regardless of the delay period.

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Alice Bertella
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29 views

Lab Report #4: Alice Bertella 28/10/2016

The document summarizes a lab report on an experiment about intertemporal choices. 50 students were asked to choose between immediate or delayed monetary rewards over different time periods. The results were analyzed by creating tables and graphs showing the fraction of students who chose immediate rewards and the implicit interest rates associated with their choices. It was found that most students preferred immediate rewards when the interest rate was 0%, but preferred delayed larger rewards when interest rates were above around 20%. The results also showed common switching points from immediate to delayed rewards around certain reward amounts, regardless of the delay period.

Uploaded by

Alice Bertella
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Lab

Report #4

Alice Bertella
28/10/2016

Intertemporal choices


Rules of Interaction

The experiment has been carried out by 50 students, each of them had to answer to two
different sets of questions (10 for each) regarding immediate gains and future gains. In the
first set of questions the students have been asked to choose over receiving 1000 euros now
or waiting and receiving 1000 euros or more (up to 1300) in two months. The other set of
questions asked the students to choose over accepting 1000 euros in two years or 1000 euros
and more (up to 1300) in two years and two months.

Results and Interpretation

In the first 4 points, we are only considering block 1.

Firstly, we are asked to made up a table in where there are described each decision, the
fraction of people who choose the sooner reward over the later reward and the implicit yearly
interest rate of the choice.





To compute the interest rate (r) we replacing for each question every values in the formula
r=-1+root (t)(M/C), where t is the time in years (1/6) and M-C are respectively the final and
the initial capital.

Moreover, we are asked to made up a graph of the fraction of people who chose the sooner
reward on the horizontal axis and the interest rates on the vertical axis (ordinated from the
lowest to the highest ones)

1


It can be immediately noticed that when the interest rate was equal to 0 most people decided
to receive the money immediately, whereas the situation completely changed for interest
rates higher than 198,5. For what regards rates between 12,6 and 77,1 instead, it can be said
that people choosing the sooner reward over the later decreased according to interests
growing.

From the point 5 up to the 7 we had to draw our consideration on block 2.

At the beginning, we need to consider block one decisions (never, q1, q2, q3, etc.) and block
two (never, fed1, fed2, etc.) and for each participant we are asked to find out the decision
number of first switch from the sooner reward to the later reward, considering only the ones
who never switched more than one time.
Since none of the participants exhibit multiple switches neither in block one nor in the block 2
we kept all of them.
I made up a table to describe the situation more efficiently:
Never q1 q2 q3 q4 q5 q6 q7 q8 q9 q10
Block 0 4 10 3 16 9 5 0 3 0 0
1
Block 0 3 16 3 11 3 8 1 3 0 1
2

It can be easily noticed that the most striking switches on the decision of receiving
immediately or waiting are observed from question 1 and question 2 (almost everyone is not
willing to wait to receive the same amount of money while ten/sixteen people are ready to
wait two month/two years and two month for ten euros more) and from question 4 and
question 5 (60 euros can be described as the amount of money which most people consider
enough to wait for the money, both in the case of two month and for the case of two years and
two month). It is interesting to notice that these switches happen on the same amount of
money in the both blocks, regardless the difference in the period of time to wait.

Furthermore, we are asked to count the number of participants who switched at the same
decision number both in block one and in block two, who switched earlier and who did later
in the block one than in block two.

Switch at the same First switch in
decision Block 1
Yes 9 19

2
No 41 22

The implicit interest rate in decision k of the first block is the same as in the decision k of the
second block. Nevertheless, there are some people who decided to switch on different
question numbers in block 1 and 2. This is because such kinds of decisions mostly depend on
personally preferences and cannot be predicted through mathematically formulas. There is
not a fixed amount of money or period of time in which people are obliged to switch their
decision from gaining to waiting, even if it possible to notice some common behavior (as it
happened in our case.

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