Time-based versus money-based decision making under risk: An experimental investigation

• Published in: Journal of economic psychology 2015-10, Vol.50, p.52-72
• Main Authors: Festjens, Anouk, Bruyneel, Sabrina, Diecidue, Enrico, Dewitte, Siegfried
• Format: Article
• Language: English
• Subjects: Decision analysis; Money; Parameter estimation; Prospect theory; Risk assessment; Risk preferences; Studies; Time; Time vs. money; Utility functions
• ISSN: 0167-4870; 1872-7719
• DOI: 10.1016/j.joep.2015.07.003

•We elicit risk preferences and prospect theory parameters in the time and money domain.•Individuals hold similar risk preferences for time and monetary outcomes.•Time is money for the gain utility function, loss aversion, and decision weights.•The utility function for small losses is less concave & variable for time vs money.•The utility function for large losses is more concave & variable for time vs money. This paper investigates whether individuals make similar decisions under risk when the outcomes are expressed in time versus monetary units. We address this issue in two studies measuring individual risk preferences and prospect theory parameters (i.e., utility curvature, probability weighting, and loss aversion) for both time and money. In the first (resp., second) study we consider relatively small (resp., large) time and monetary outcomes. We find that individuals hold similar risk preferences for time and money; we also find evidence that “time is money” with regard to the utility curvature for gains, loss aversion, and decision weighting. However, individuals have different valuations of losing time and money. The utility function for small losses of money is more concave and variable than the utility function for small losses of time (Study 1), but the utility function for large losses of time is more concave and variable than that for large losses of money (Study 2). We argue that these results reflect a difference in the perceived slack of the respective resource.