Risk, Time, and Psychological Distance: Does Construal Level Theory Capture the Impact of Delay on Risk Preference?

Do people change their preferences when they are offered the same risky lottery at different times (now vs the future)? Construal Level Theory (CLT) suggests that people do because our mental representation of events is moderated by how near or distant such events are in time. According to CLT, in the domain of risk preferences, psychological distance causes payoffs and probabilities to be differentially weighted or attended between present and future time points: temporal distance increases the influence of payoffs and decreases the influence of probabilities. Specifically, CLT predicts that high probability/low amount lotteries (i.e., %-lotteries) are preferred in the present, whereas low probability/high amount lotteries (i.e., $-lotteries) are preferred in the future, even when the Expected Value of these lotteries is identical. We present a functional characterization and systematic investigation of this putative pattern of risk preferences and develop a formal model that incorporates CLT's predictions. In 5 experiments we examined several factors that could moderate the effect (e.g., outcome and probability magnitude, lottery presentation format, incentivization procedures). Both our behavioral observations and modeling results suggest the effect is labile, and if it does occur it is not fully consistent with our formal model of CLT.