When immediate losses are followed by delayed gains: Additive hyperboloid discounting models.

Discounting research has tended to focus on one simple situation, choice between an immediate, smaller gain and a larger, delayed gain, that is assumed by many to capture the essence of self-control. In everyday life, however, most choice situations are more complex, often involving combinations of gains and losses. We examined discounting in situations involving an immediate loss followed by a delayed gain that resulted in either a net gain (Experiment 1) or a net loss (Experiment 2) and compared it with discounting when there was only a delayed gain and no immediate loss. Larger delayed gains were discounted less steeply than smaller regardless of whether or not they were preceded by an immediate loss. Discounting functions of the same general hyperboloid form that describe the discounting of delayed gains in simple choice situations accurately described the discounting of combinations of gains and losses, although results differed depending on whether the combination would result in a net gain or a net loss. Participants consistently discounted loss-gain combinations less steeply than gains not preceded by an immediate loss when the combination represented a net loss (Experiment 2), but not when the combination represented a net gain (Experiment 1), a result analogous to the sign effect in simple choice situations (i.e., delayed gains are discounted more steeply than delayed losses). Taken together, these findings support the view that complicated choices like those common in everyday life can be understood within the discounting framework.