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Pay One or Pay All? The Role of Incentive Schemes in Decision Making Across Adulthood


Horn, Sebastian S; Schaltegger, Thierry; Best, Ryan; Freund, Alexandra M (2023). Pay One or Pay All? The Role of Incentive Schemes in Decision Making Across Adulthood. Journals of Gerontology, Series B: Psychological Sciences and Social Sciences, 78(1):51-61.

Abstract

Objectives
This research addresses how younger and older adults’ decisions and evaluations of gains and losses are affected by the way in which monetary incentives are provided. We compared 2 common incentive schemes in decision making: pay one (only a single decision is incentivized) and pay all (incentives across all decisions are accumulated).

Method
Younger adults (18–36 years; n = 147) and older adults (60–89 years; n = 139) participated in either a pay-one or pay-all condition and made binary choices between two-outcome monetary lotteries in gain, loss, and mixed domains. We analyzed participants’ decision quality, risk taking, and psychometric test scores. Computational modeling of cumulative prospect theory served to measure sensitivity to outcomes and probabilities, loss aversion, and choice sensitivity.

Results
Decision quality and risk aversion were higher in the gain than mixed or loss domain, but unaffected by age. Loss aversion was higher, and choice sensitivity was lower in older than younger adults. In the pay-one condition, the value functions were more strongly curved, and choice sensitivity was higher than in the pay-all condition.

Discussion
An opportunity of accumulating incentives has similar portfolio effects on younger and older adults’ decisions. In general, people appear to decide less cautiously in pay-all than pay-one scenarios. The impact of different incentive schemes should be carefully considered in aging and decision research.

Abstract

Objectives
This research addresses how younger and older adults’ decisions and evaluations of gains and losses are affected by the way in which monetary incentives are provided. We compared 2 common incentive schemes in decision making: pay one (only a single decision is incentivized) and pay all (incentives across all decisions are accumulated).

Method
Younger adults (18–36 years; n = 147) and older adults (60–89 years; n = 139) participated in either a pay-one or pay-all condition and made binary choices between two-outcome monetary lotteries in gain, loss, and mixed domains. We analyzed participants’ decision quality, risk taking, and psychometric test scores. Computational modeling of cumulative prospect theory served to measure sensitivity to outcomes and probabilities, loss aversion, and choice sensitivity.

Results
Decision quality and risk aversion were higher in the gain than mixed or loss domain, but unaffected by age. Loss aversion was higher, and choice sensitivity was lower in older than younger adults. In the pay-one condition, the value functions were more strongly curved, and choice sensitivity was higher than in the pay-all condition.

Discussion
An opportunity of accumulating incentives has similar portfolio effects on younger and older adults’ decisions. In general, people appear to decide less cautiously in pay-all than pay-one scenarios. The impact of different incentive schemes should be carefully considered in aging and decision research.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of Psychology
Dewey Decimal Classification:150 Psychology
Uncontrolled Keywords:Geriatrics and Gerontology, Gerontology, Clinical Psychology, Social Psychology
Language:English
Date:28 January 2023
Deposited On:20 Jan 2023 12:25
Last Modified:29 Mar 2024 02:38
Publisher:Oxford University Press
ISSN:1079-5014
OA Status:Closed
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1093/geronb/gbac108
PubMed ID:35972470
Project Information:
  • : FunderSNSF
  • : Grant ID100019-185463
  • : Project Title