Personality Influences Hyperbolic Discounting

We gather survey evidence for the influence of the HEXACO personality traits on the phenomenon of hyperbolic discounting. We also consider the demographics of age, sex, income and education, and evaluate how these interact with personality and hyperbolic discounting. Due to a sampling technique of “snowball”, we assembled a sample of well-educated and relatively wealthy adults from both sexes. Most respondents escaped hyperbolic discounting, and for those affected there was no “magnitude effect”. Those participants showing higher conscientiousness were less hyperbolic. Moreover, those more open to experience who were m ore extroverted at the same time were also less hyperbolic. We also detail how such personality traits influence hyperbolic discounting mediated by the demographics of age, sex, income and educational attainment. Thus, conscientiousness, openness to experience and extraversion are traits that contribute to rational decisions in intertemporal choice in our sample, in that participants with these personality traits are less hyperbolic.

• Intertemporal Choice
• Hyperbolic Discounting
• Impatience
• Personality
• HEXACO
• Big Five

1. Introduction

As William James once observed, “There is very little difference between one man and another; but what little there is, is very important.” Differences in behavior can be predicted by the personality traits of intelligence and the other Big Five: [1] [2] emotionality (E), extraversion (X), agreeableness (A), conscientiousness (C) and openness to experience (O). The trait of honesty-humility (H) [3] can be added to the Big Five to make up the HEXACO model of six dimensions. The HEXACO can be assessed with reasonable validity using a 24-item inventory [4] . Here, we are interested in assessing how the HEXACO personality traits predict economic behavior in intertemporal choice, and in particular the phenomenon of hyperbolic discounting [5] . There is survey evidence that people employ a higher rate when discounting in the short run, and thus that today’s preferences differ from tomorrow’s [6] . This is known as hyperbolic discounting. As for intelligence, hyperbolic discounting has been shown to be related negatively to cognitive ability [7] [8] [9] [10] . Though there is research relating the Big Five to intertemporal choice [11] , there is no work relating the HEXACO traits to hyperbolic discounting. Here, we intend to fill this gap by gathering survey evidence collected using questionnaires. To assess the HEXACO, we consider the 24-item inventory of De Vries [4] , and to gauge hyperbolic discounting we employ the questionnaire of Sutter et al. [12] .

We also collect information from respondents regarding the demographics of age, sex, income and education, and evaluate how these interact with personality and hyperbolic discounting. In the literature, risk-taking economic behavior depends on age [13] . There is little neurological differences between 25 year olds and 75 year olds, but those below 25 years old show difficulty in accurately perceiving risks. This can be due to fact that their hormones trigger an urge to impress peers through reckless behavior. Indeed, they usually have high testosterone [14] and low monoamine oxidase levels, and these affect serotonin and mood. Hormones may thus influence their attitudes toward intertemporal choice as well as risk-taking. One individual’s sex also matters for risk-taking [15] and thus possibly for intertemporal discounting, too. Moreover, income may be related to intertemporal choice mediated by cognitive processes. For instance, high-income bank customers are less hyperbolic when discounting the future [10] . Education also matters for economic behavior, and here behavioral factors may play a role [16] . Thus, educational attainment may influence hyperbolic discounting depending on personality traits.

The rest of this paper is organized as follows. Section 2 presents the materials and methods used. Section 3 shows the results found and contrasts them with the literature. Section 4 concludes the study.

2. Materials and Methods

We gauge hyperbolic discounting through a questionnaire [12] where respondents are asked to choose between two sure payoffs at two distinct points in time: an early payoff and a later payoff. The participants are presented eight choice lists, each containing 10 questions. In a list, the early payoff remains the same and the later payoff increases monotonically (Figure 1). The lists differ by the size of the stake of the early payoff (either 100 or 250) and by the timing of the early and late payoffs (Figure 2). Participants are shown the eight lists in Figure 1 in a random order.

We calculate the “future equivalent” of the fixed early payoff from the eight lists as the midpoint between the two later payoffs, where a respondent switches from the earlier to the later payoff. Figure 3 shows how to compute the future equivalent for List 1. The participant chose the payoff today twice (left-side option) and then switched to the right-side option. This means her future equivalent was $107.50, that is, ( $ 105.00 + $ 110.00 ) / 2 . The larger the future equivalent, the stronger the delay aversion and impatience.

Of note, Lists 1 and 2 refer to the identical delays of three weeks with an upfront delay of zero and three weeks, respectively. In Lists 3 and 4 the delay is one year, and the upfront delay is zero and three weeks, respectively. To learn whether

discounting is constant or not, we compare the future equivalents between such lists. If future equivalents are higher for List 1 than for List 2, and for List 3 than for List 4, the early payoff receives more weight than the payoff in three weeks. This would provide evidence of hyperbolic discounting. We can further control for the effects of stake size by considering these four timing combinations for both high and low stakes.

After computing the future equivalents of each list in Figure 1, the lists can be compared in pairs. Considering the delays (three weeks or one year) and the stakes (100 or 250), four types of hyperbolic discounting can thus be tracked (Table 1). If the future equivalent in List 1 is, say, greater than that in List 2, this means the early payoff is weighted more than the payoff in three weeks. This would reveal a hyperbolic discounting of Type 1. Comparing Lists 3 and 4 yields a Type-2 hyperbolic discounting, and so on.

From the computation of future equivalents for the eight lists, we can calculate “implicit annual discount rates” [12] , i, as i = ln ( futureequivalent / earlypayoff ) , for a one-year delay (assuming continuous discounting), and i = ln ( futureequivalent / earlypayoff ) ( 52 / 3 ) , for the delay of three weeks, as a year has 52 weeks.

As observed, we gauged the personality traits of the participants through the Brief HEXACO Inventory (BHI) of De Vries [4] . This questionnaire assesses the traits randomly using a direct Likert scale or a reverse Likert scale (Table 2). Thus, we asked the participants to indicate to what extent they agreed with the 24 statements: 1 = strongly disagree; 2 = disagree; 3 = neither agree nor disagree; 4 = agree; 5 = strongly agree.

BHI

1) I can look at a painting for a long time.

2) I make sure that things are in the right spot.

3) I remain unfriendly to someone who was mean to me.

4) Nobody likes talking to me.

5) I am afraid of feeling pain.

6) I find it difficult to lie.

7) I think science is boring.

8) I postpone complicated tasks as long as possible.

9) I often express criticism.

10) I easily approach strangers.

Table 1

Types of hyperbolic discounting measured by future equivalents and considering delays and stakes

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