Differential effects of probability and delay on choice with variations in income level

Rachlin, Raineri and Cross (1991) developed a model of choice behavior which argues that risk and delay of an outcome are interpreted as subjectively equivalent. This research studied the effect that changes in income would have on choices involving risk and delay. Fifty-five students from undergraduate psychology classes received course credit for completing a questionnaire which consisted of pretraining, and three experiments. In Experiment 1, the hypothetical choices involved a sure gain of a small dollar amount and a large dollar amount whose probability varied. The data showed that as the large alternative increased risk aversion increased. Experiment 2 involved choices between amounts of money as in Experiment 1, an immediate small amount and a larger amount now available at various delays. As the larger alternative grew delay aversion decreased, a trend that reversed only at the highest value. Experiment 3 consisted of choices between varied equivalent amounts of money, available at various probabilities and various delays. Again, increases in income increased risk aversion. The equivalences found in Experiment 3 were predictable from the results of Experiments 1 and 2. All three experiments demonstrated that changes in income do affect the nature of the relationship of risk and delay in choice. As the income level increased, the trend was towards an increased risk aversion and reduced delay aversion. This final result violates Rachlin et al.'s model demonstrating it is incomplete.