When the Future Seems Closer: The Moderating
Effect of Subjective Future Time on Financial
Constraints and Myopic Decision Making
By
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When the Future Seems Closer: The Moderating
Effect of Subjective Future Time on Financial
Constraints and Myopic Decision Making
Master Thesis, MSc Marketing Management
University of Groningen, Faculty of Economics and Business January 15th, 2018
Despoina Paspati Student number: S3242315 Address: Kleine Grachtstraat 4 9717HM Groningen, Netherlands
Tel: +31 (0) 627254427
E-mail: despina.pas@gmail.com; d.paspati@student.rug.nl
First Supervisor:
Assistant Professor Mehrad Moeini-Jazani
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Abstract
Building on recent scientific findings which show that financial constraints result in increased discounting rates, we propose that time perception has a moderating effect on the relationship between financially constrained consumers and their myopic decision making. A high-power experiment was designed in which participants were randomly assigned to a condition of financial constraints or financial adequacy. Subjective future time perception was manipulated such that time felt closer for half of the participants, while the other half remained in a control condition in which time perception was not manipulated. Subsequently, participants’ subjective future time perception was measured. Results from the control condition showed that participants who felt financially constrained perceived 6 months in the future to be further away than those who felt financially adequate. However, after being exposed to the closer time perception manipulation, participants’ subjective future time perception was shortened remarkably. Most importantly, main findings from this study showed that participants assigned to the financially constrained condition discounted significantly less after being exposed to the manipulation of feeling future time to be closer. This novel discovery can be used to help financially constrained consumers behave less myopically, and hence, make better life decisions.
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Table of Contents
Introduction ... 4
Theoretical Framework Poverty, Financial Constrains, and Myopic Behavior ... 6
Financial Constraints, Subjective Time Perception, and Executive Function ... 10 Overview ... 15 Research Design Participants ... 17 Procedure ... 17 Results The Effect of Financial Constraints and Manipulation of Time on Subjective Perception of Future Times ... 21
The Effect of Financial Constraints and Manipulation of Time on Discounting ... 23
The Mediating Role of Subjective Future Time Perception ... 25
Robustness Check and Ruling Out Alternative Explanations... 26
General Discussion Conclusions ... 28
Limitations ... 29
Managerial Implications and Future Research ... 29
References ... 31
Appendix 1.Manipulation Text for Financial Constraints ... 38
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Introduction
Poverty has been a burden to human development from very early stages and it is an issue that prevails even today (Haushofer, Schunk, & Fehr, 2013), resulting in many consumers being forced to face it in their everyday lives. It is not only persistent in underdeveloped countries but also in the western and developed societies. Some consumers encounter difficulties such as providing for themselves or their families, while others, although they have access to staple goods such as food and housing, are constrained in their lifestyle due to economic insecurity (Sharma & Alter, 2012; Haushofer et al., 2013; Liu, Feng, Suo, Lee, & Li, 2012). Statistic data shows that 10.7% of the world’s population (768.5 million) lives under $1.90 per day (The World Bank, 2017). Extensive research has shown that financially constrained consumers are more impatient when it comes to decision making, and therefore, are more prone to myopic behavior. This type of decision making, or otherwise known with the term high discount rate, indicates that consumers would rather receive a smaller reward now, than wait in order to receive a larger reward in the future (Hausman, 1979; Pender, & Walker, 1990; Sullivan, 2011; Lawrance, 1991). However, this behavior triggers a critical issue as it results in the poor consumers being unable to escape their poverty due to stress, pessimistic feelings, feelings of helplessness, increase of risk taking, and impulsivity (Haushofer & Fehr, 2014; Gneezy & Imas, 2015; Haisley, Mostafa, & Loewenstein, 2008). While many past papers have tried to understand the reason behind why sooner rewards are favored by the poor consumers’ decision-making process, so far there has been no established connection to their subjective time perception. The aim of this study is to investigate why financially constrained consumers make myopic choices, and more specifically, to test whether subjective future time perception (SFTP) modulates their decision making.
5 Taking these findings into consideration, we established our theoretical framework through executive functioning. Executive performance is affected by different factors such as substance abuse, pain, smoking, and as mentioned above, financial insecurity (Schilbach, Schofield, & Mullainathan, 2016). Subsequently, these factors have been found to alter subjective time perception. More specifically, when consumers’ executive function is depleted, they tend to overestimate future times. Furthermore, impulsivity has been found to result in higher discount rates, and a longer time perception (Wittmann & Paulus, 2008). Individuals prone to high impulsivity, such as ADHD patients, have been found to perceive time to pass slower (Mathias, Furr, Daniel, Marsh, Shannon, & Dougherty, 2007; Barkley, Edwards, Laneri, Fletcher, & Metevia, 2001). Additionally, financial deprivation is akin to a visceral state (Lea & Webley, 2006), which translates to it being an impulsive sensation similar to pain, hunger, nicotine deprivation, drug-dependency, and sexual desire (Loewenstein, 1996). Substance abusers, including alcoholics and smokers, have been found to suffer from lower performance of decision making, while their subjective perception of future time is elongated (Bechara & Martin, 2004; Petry, Bickel, & Arnett, 1998; Manganiello, 1978; Smart, 1968; Alvos, Gregson, & Ross, 1993). Lastly, individuals who suffer through chronic and terminal diseases were also found to have a slower perception of future time (van Laarhoven, Schilderman, Verhagen, & Prins, 2011).
We designed an experiment to further explore the relationship between financial insecurity and myopic behavior, and the link with consumers’ subjective future time perception. During the experiment, which was conducted through Amazon’s Mechanical Turk, and given the manipulation of time, feelings of future time being closer were induced to half of the participants, while the rest were assigned in a control condition.
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Theoretical Framework
Poverty, Financial Constraints, and Myopic Behavior
In the past years extensive research has shown that people who live in poverty opt for smaller and sooner rewards, relative to those who live in abundance, that tend to discount less on future rewards. Research has taken place by Hausman (1979), Pender, & Walker (1990), and Sullivan (2011), indicating that there is high relation between poverty and intertemporal choices. Liu, Feng, Suo, Lee, & Li (2012) found that people who do not necessarily live in poverty but instead have poverty feelings, are more impulsive and therefore make more myopic choices. Moreover, they reported that poverty cues can increase discounting, and that switching between poverty and financial adequacy could lead to changes in their executive functioning. According to Yang (2016), these poverty feelings impact myopic behavior through two paths; cognition and emotion. Consumers’ minds have limited cognitive capacity and therefore their attention is limited (Luck & Vogel, 1997), while their emotions are negatively affected by financial inadequacy (Haushofer & Fehr, 2014). Haushofer & Fehr (2014) found that financial deprivation induces stress and pessimistic feelings. This leads to the financially inadequate consumers having higher discount rates, and consequently, having an increased likelihood of remaining in the poverty trap (Farah & Hook, 2017). This is also known as the “culture of poverty”, in which myopic decision making and risky behavior make consumers become, and ultimately remain, poor (Banfield, 1970; Lewis, 1970).
7 income growth. In a study by Jachimowicz, Chafik, Munrat, Prabhu, & Weber (2017), which tried to explain the financially constrained people’s behavior, it was found that poverty induces myopic decision making due to lower levels of trust. Financially deprived people tend to feel insecure about whether they will truly receive the larger, delayed reward, and therefore they tend to prefer the shorter, immediate reward. The authors differentiated between two types of trust; generalized trust, and community trust. While financially constrained people have lower levels of generalized trust due to environmental reasons, which is challenging to reshape, an increase in community trust can decrease their discounting rates.
Critical scientific findings show that myopic behavior has a strong influence on consumers’ financial situation. According to Shah et al. (2012), financially constrained individuals are more likely to be involved in extreme borrowing, and acquirement of short-term loans with high interest rates, indicating that their judgement is impaired. As a result, their finances do not improve, and their myopic behavior is increased. At the same time, financially deprived individuals tend to save less for the future. Sharma & Keller (2017) found that financially deprived people are more attracted to opportunities to gain rather than save money, while at the same time they are more likely to overlook jobs with saving benefits. Particularly, during one of the studies, participants with induced feelings of financial constraints were asked to choose between a job that would pay a higher salary and a job that would pay less but would instead compensate on transportation savings. The experiment showed that they were 22% less likely to select jobs that provided savings. Furthermore, their findings indicate that financially constrained people are more prone to inferior outcomes due to their preference of higher income jobs, even though the savings of the counterpart jobs might provide higher rewards in the long term. These results suggest that financially constrained consumers are impatient towards income, and as a result, opt for jobs that appear to be paying a higher wage instead of jobs with delayed rewards that pay more over time, but through savings instead.
8 feelings of mortality to participants. They observed that thoughts of mortality had a stronger effect on people who grew up poor, making them have a strong desire for smaller and immediate outcomes, and consequently a stronger desire for gambling and risk taking. Additionally, Gneezy & Imas (2015) found that financially deprived people have increased feelings of helplessness, resulting in higher myopic decision making, impulsivity, and risk taking. Similarly, Payne et al. (2017) found that high risk decisions are more likely to be made by individuals who face economic inequality, leading to poor payoffs. Moreover, they tend to purchase more lottery tickets than the financially satisfied, in the hopes of achieving financial equality with their peers (Haisley et al., 2008).
However, myopic behavior does not only have a strong effect on finances, but it also influences domains such as consumers’ education, and health. Particularly, on a paper by Lawrance (1991) it was found that poor American households discount significantly more than financially adequate ones. More specifically, it indicated that high discounting rates negatively correlate with income, which may result in lower educational accomplishments. The author concluded that high discounting rates could be explained by two factors. The first factor is low educational investments, with the poor having a strong preference for immediate and low-income jobs over jobs through the path of education that lead to higher wage rewards, while the second factor is culture. Meanwhile in the food domain, Briers & Laporte (2013) found that financially constrained consumers assign more value to food energy, in comparison to financially adequate consumers. They reported that the financially constrained generally tend to consume larger quantities of food, while at the same time they prefer high caloric meals. This behavior directly affects their health, and is explained by their need to compensate for their lack of financial resources.
9 consumers, in order to emotionally compensate for the negative feelings caused by their financial scarcity, tend to acquire goods that are rare rather than plenteous. Moreover, this study showed that people compare their current financial state to others and to their own past selves in order to identify their economic status. This finding was later endorsed by Payne, Brown-Iannuzzi, & Hannay (2017), who observed that people tend to compare their financial situation with higher income earners, resulting in poverty feelings. Hence, poverty could be classified as a subjective feeling rather than a situation, which is not necessarily based on income (Tully, Hershfield, & Mayvis, 2015).
Lastly, a few studies focused on consumers’ behavior and the types of goods they prefer according to their financial status. In a study by Tully, Hershfield, & Meyvis (2013), it was observed that financially constrained consumers preferred tangible goods, thinking that they would last longer in comparison to experience goods. They concluded that financially constrained consumers value endurance over happiness, and that is why they prefer spending their limited income on tangible goods rather than experiences. Further, research by Roux, Goldsmith, Blair, & Kim (2014) suggested that people who face financial deprivation in their everyday lives frequently turn to materialism, and to generally assigning more value to material goods, because to them they appear to last for a longer period of time. Later, Tully et al. (2015) extended their first findings by adding that consumers are more attracted to material goods, while repelled from experiences, when both options are offered at the same time. Moreover, these results could be explained by the financially constrained consumers’ impulsive behavior and their cravings for impulse buying. These findings are all in line with the literature above, as they translate to financially constrained consumers choosing to spend their already restricted income on smaller outcomes like tangible goods, and generally have a more materialistic behavior, over larger and more rewarding outcomes, like experiences.
10 consumers could partly be explained by an alternation of their subjective time perception (Barratt, 1983; Takahashi, 2006).
Financial Constraints, Subjective Time Perception, and Executive Function
There are two main components which link financial constraints to subjective perception of time. The first component is that financially constrained individuals have impaired executive function. It is important to mention here that strong scientific evidence suggests that impatience and executive functioning are interrelated; higher cognitive load results in increased impatience for monetary rewards (Deck & Jahedi, 2015). Being financially constrained takes a toll on consumers’ minds, especially since cognitive capacity is limited (Luck & Vogel, 1997). Furthermore, critical evidence has been found to support the notion that the decision-making process and behavior of the financially constrained is altered due to various factors, with the major components being attention, and executive performance.
11 many cognitive resources. In other words, this suggests that when poor individuals worry about their financial inadequacy, they lose the ability to focus on other issues that they might be facing. Furthermore, findings by Johar et al. (2015) are in line with Mani et al. (2013), suggesting that the minds of the poor are preoccupied with reoccurring thoughts about their rough financial situation, which can lead to increased myopic behavior and cognitive malfunction. In addition, Ozdenoren, Salant, & Silverman (2012) found that when poor consumers try to avoid giving in to financial temptations, their willpower is drained. This leads to them being mentally exhausted.
In another critical study by Schilbach et al. (2016), the authors emphasized on the limited bandwidth of cognition and they tried to demonstrate why people who face financial constraints have less bandwidth. They explained that there are two different parts of bandwidth, cognitive capacity and executive control. While cognitive capacity involves the logical mental functions of the brain, executive control is about attention retention and information management. Moreover, they distinctly mentioned some of the factors that can have a strong effect on cognition. Namely, these are dietetics, alcohol consumption, financial insecurity, lack of sleep, corporal pain, and sound pollution. These factors are more likely to affect people that face financial deprivation, and not only that, but financially deprived people are also more likely to be affected more severely, as they are less capable of handling them.
12 experiment it was found that mothers of children living with a lower socioeconomic status mentioned increased melancholic feelings and more self-destructive behaviors.
Now that the connection between poverty and executive function has been established, it is essential to understand why individuals with impaired executive function tend to overestimate future times. Here it is important to be mentioned the fact that there is a wide literature connecting people’s myopic behavior to their subjective time perception. Notably, Zauberman & Lynch (2006) found that consumers value present time much more than past or future time, which leads to highly inconsistent discount rates and time preferences. These findings are in line with Zauberman, Kim, Malkoc, & Bettman (2009) who found that time perception is non-linear, and that this could explain consumers’ hyperbolic discounting; the tendency of behaving more myopically as time passes. Lastly, another paper worth mentioning here is by Kim & Zauberman (2009), in which they reported that consumers who perceive future time delays to be longer, prefer to buy products now instead of waiting for discounts and price promotions, signaling increased impatience. Correspondingly, there is strong scientific evidence that connects executive functioning with subjective perception of time. Many studies have shown that cognitive depletion results in time distortion, and more specifically, in overestimation of perceived time.
13 making appear to be similar to children of younger ages. Similarly, Barkley, Murphy, & Bush (2001) discovered that young adults with ADHD face difficulties with perception of time, dealing with inability to portray time duration. More specifically, they found that ADHD patients have a deficiency of reproducing time, rather than estimating it. According to Barkley (1997), ADHD individuals have a damaged sense of time due to disruptions in their working memory aspects which guide behavior. Another mental disorder that affects cognition (Wells & Matthews, 1996), and subsequently, subjective perception of time, is anxiety. Bar-Haim, Kerem, Lamy, & Zakay (2009) found that individuals with higher anxiety levels have an altered subjective perception of time in comparison to individuals with very low anxiety levels. More precisely, when highly anxious individuals feel even mildly threatened in their environment, they tend to perceive time to move slower, or alternatively, elongate.
The second component that links financial constraints to subjective time perception is the finding that financial deprivation is experienced as a visceral state. Lea & Webley (2006) found that financially constrained individuals have a constant desire of acquiring money, which is analogous to a hungry individual craving for a meal. They indicated that money can be addictive the same way that food and other visceral states can. It has been found that people in visceral states, such as hunger, nicotine deprivation, drug-dependency, pain, and sexual desire, all being impulsive sensations (Loewenstein, 1996), overestimate future times. Moreover, as mentioned earlier, individuals who feel financially inadequate experience a state of hunger which results in increased food consumptions (Briers & Laporte, 2013), which further indicates that financial deprivation is a visceral state. On a critical paper by Kim & Zauberman (2013) it was observed that when people were sexually aroused, their economic decisions were more myopic, as they perceived subjective future time to be elongated. Their experiment included exposure to sexual cues and the results showed that subjective future time perception plays a critical role on how people make economic decisions.
14 paper by Chou, Parmar, & Galinsky (2016) indicated that financial insecurity increases sensitivity to corporal pain, while it reduces pain endurance. They clarified that financial insecurity can occur in all economic statuses as it depends on one’s current, but also future, financial state. They proposed that financial insecurity induces feelings of control loss, which ultimately produces corporal pain. They concluded that it physically hurts to be financially insecure. Findings by Fredette (1995) suggest that cancer survivors engage in a lifelong battle of maintaining health, and cope with high levels of insecurity, fear, exhaustion, reduced energy, depression, anxiety, and other physical complications caused by fighting the disease. van Laarhoven et al. (2011) found that patients in progressed cancer stages were more focused on the present rather than the future, and they perceived time to run slower than healthy appearing, asymptomatic patients, which was directly related to the pain caused by the disease. Furthermore, Rasmussen & Elverdam (2007) found that perception of time for cancer patients is disrupted permanently after their diagnosis, and even after they survive the disease their perception of time does not return to its earlier form. The former patients face loneliness and alienation from their medical professionals.
15 several hours. Lastly, Wittmann, Leland, Churan, & Paulus (2007) conducted an experiment with stimulant-dependent individuals with dependencies on drugs, cigarettes, and alcohol, in which they found that they show a reduced ability in perceiving time. They concluded by saying that they tend to overestimate longer periods of time due to their impulsive behavior.
Together, these findings indicate that financially constrained individuals could have an elongated subjective future time perception. Poverty feelings lead to impaired executive functioning by consuming people’s minds. Subsequently, people’s deteriorated executive functioning results in an altered subjective time perception. Substance abusers, people who suffer through diseases and chronic pain, and individuals with increased impulsivity traits have an elongated subjective time perception, meaning that time seems to pass slower. Thus, this study aims to directly investigate consumers’ subjective future time perception in the hopes of understanding why the financially constrained are more prone to myopic decision making.
Overview
Poverty is a phenomenon that is extremely challenging to alleviate due to its broadness. Consumers who struggle with their finances are doomed to continuously making myopic choices, being impulsive, taking risks, and after all, remaining poor (Banfield, 1970; Lewis, 1970; Farah & Hook, 2017). All the findings mentioned above are strong indicators that financial constraints could be highly linked to subjective perception of time.
Our main idea is to investigate the moderating rule of future time manipulations on myopic behavior of the financially constrained. We expect that the moderating role of time perception is stronger among the financially constrained, relative to financially adequate individuals. Specifically, we hypothesize the following:
16 H2: When future perception of time remains intact, we expect the financially constrained people to be more impatient than the financially adequate.
For the underlying process of this effect, as we discussed, we expect our manipulation of time to alter subjective time perception of people. As a result, we propose:
H3: The moderating effect between financial constraints and manipulation of time should be mediated by subjective time perception of people assigned to the financially constrained condition. Financial Constraints Manipulation of Future Times (Close vs. Control) Myopic Behavior Financial Constraints Manipulation of Future Times (Close vs. Control) Myopic Behavior Subjective Future Time Perception
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Research Design
Participants
The survey was created using the Qualtrics online platform. G*Power was used to estimate the number of participants needed for this study to be high-power (80%, effect of 0.1, suggested total sample size of 787 participants). Participants were recruited through Amazon’s Mechanical Turk and the complete sample size was 818 participants; 67 participants were excluded from the analysis because of irrelevant text and failure of attention questions, and each participant was paid $0.7 for completing the survey. The analysis was conducted to 751 participants (Male = 348, female = 403, MAge=35.93). The study was a 2 (prime: financially constrained versus financially adequate) × 2 (prime: time seems closer versus control) between-subjects design.
Procedure
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Figure 3: Financial Constraints
The second financial condition, the “financial adequacy” condition, was a control condition aiming to make participants feel economically content. In this condition the slider ranked from “$0” to “$2000 or more” (see figure 4). Then, participants were asked to take a few minutes to reflect on how it feels to be financially adequate and to know that they have sufficient money to use at their will or when required in daily life, and write a small essay about it (see appendix – 2).
Figure 4: Financial Adequacy
19 tempo became more impatient. The last paper that experimented with future time perception is by Kim & Zauberman (2013), this time with the use of sexual cues. As mentioned earlier, they reported that participants who were exposed to sexual cues became more myopic in their behavior and perceived future time to elongate. Nevertheless, the use of these manipulations would have created further risk in this study due to the additional new parameter that would have been introduced to the experiment. To date no paper has manipulated future time perception in a way that was suitable for our study. As a result, our manipulation was inspired by Galak, Redden, Yang, & Kyung (2014). In this paper a slider was used which ranked from “1 Day Ago” to “Now” in the time seems close condition, and a slider which ranked from “1 Month Ago” to “Now” in the time seems far condition. Consequently, in our experiment participants were randomly assigned to one of two conditions. The first condition aimed at manipulating participants into perceiving future time to be closer. They were asked to consider a time span of 30 years from now, and then indicate how close they would consider/position a day in 6 months from now, followed by a slider which ranked from “Now” to “30 years from now” (see figure 5). The second condition was a control condition, which ranked from “Now” to “1 year from now” (see figure 6). In this control condition our aim was to make participants position the slider in the middle, in order for their subjective future time perception to remain unaffected.
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Figure 6: Manipulation of Subjective Future Time Perception- “Control”
The time perception manipulation was followed by a question that assessed participants’ subjective perception of time. Using a horizontal bar, this time all participants had to indicate how long they would consider the duration between today and a day in 6 months from now. The bar fluctuated between “Very short” and “Very long” (see figure 7). This question was adopted from the research paper of Kim & Zauberman (2013), in which they asked participants to evaluate various future time durations using a computerized string with theoretically infinite length which ranged from “very short” to “very long”.
Figure 7: Subjective Future Time Perception
Next, participants had to perform a delay discounting task. They were asked to imagine they could receive $65 now. Then, they were asked to indicate how much money they would require in 6 months, in order to turn indifferent towards receiving $65 now. This task was first conceived by Thaler (1981) and through the years it has proven its validity and sufficiency.
21 two subscales; personal mastery, and perceived constraints, which were adopted from Lachman & Weaver (1998). The mastery scale consisted of four items measured on a 7-point scale, which included the questions: “I can do just about anything I really set my mind to”, “When I really want to do something, I usually find a way to succeed at it”, “Whether or not I am able to get what I want is in my own hands”, “What happens to me in the future mostly depends on me”. Perceived constraints were measured with eight items which were as follows: “There is little I can do to change many of the important things in my life”, “Other people determine most of what I can and cannot do”, “I often feel helpless in dealing with the problems of life”, “What happens in my life is often beyond my control”, “There are many things that interfere with what I want to do”, “I have little control over the things that happen to me”, “There is really no way I can solve all the problems I have”, and “I sometimes feel I am being pushed around in my life”, again, on a 7-point scale. Lastly, some demographic and attention check questions were asked.
Results
The Effect of Financial Constraints and Manipulation of Time on Subjective Perception of Future Times
In this and the following results sections the abbreviation “SFTP” will be used for referring to subjective future time perception. The first step of the analysis was to test whether the SFTP manipulation worked as expected. A 2 (financial constraints vs financial adequacy) x 2 (time closer vs control) between-subjects ANOVA was conducted with SFTP as DV. Results showed a main effect of the assigned financial condition (F(1, 747)=12.512, p<0.001, η2p=0.016). Also, a main effect of the
manipulation of SFTP was found (F(1, 747)=66.664, p<0.001, η2p=0.082). Moreover,
22 A contrast analysis was conducted to reveal more information about the interactions that took place between the different levels of the variables. It was observed that in the “control” SFTP manipulation condition there was a significant difference between the financially constrained and the financially adequate, as we argued, meaning that the financially constrained people (M=59.18, SD=25.40) overestimate future time as opposed to the financially adequate (M=44.73, SD=23.98; (F(1,
747)=29.423, p<0.001, η2p=0.038, 95% CIMean-Differences=[-19.676, -9.218]).
Interestingly, in the “close” condition this difference was eradicated as we predicted, since there was no significance between the SFTP of the financially constrained
(M=35.97, SD=25.20) and the SFTP of the financially adequate (M=37.02, SD=28.77; F(1, 747)=0.152, p=0.697, η2p<0.001, 95% CIMean-Differences=[-4.236, 6.336]), meaning
that they perceived future time to be equally close. This shows that after participants were exposed to the SFTP manipulation, SFTP of the two groups of financial constraints and financial adequacy was shortened and matched.
Furthermore, looked at differently, in the financially constrained condition, there was a significant difference between the groups of “close” SFTP manipulation condition (M=35.97, SD=25.20) and “control” (M=59.18, SD=25.40; F(1,
747)=76.162, p<0.001, η2p=0.093, 95% CIMean-Differences=[17.989, 28.431). Similarly,
in the condition of financial adequacy there was a significant difference between the groups of “close” (M=37.02, SD=28.77) and “control” (M=44.73, SD=23.98; F(1,
747)=8.182, p=0.004, η2p=0.011, 95% CIMean-Differences=[2.419, 13.006]). Both findings
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Figure 8: ANOVA between Financial Condition, SFTP Manipulation, and SFTP
The Effect of Financial Constraints and Manipulation of Time on Discounting
A second ANOVA with this time discounting as DV was conducted to analyze participants’ discounting in relation to the financial condition and SFTP manipulation. Results showed a main effect of the assigned financial condition (F(1, 747)=7.092,
p=0.008, η2p=0.009). There was no main effect of the manipulation of SFTP (F(1, 747)=0.19, p=0.890, η2
p<0.001). However, a significant interaction effect between the
assigned financial condition and the manipulation of SFTP was found (F(1,
747)=8.847, p=0.003, η2
p=0.012).
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η2
p<0.021, 95% CIMean-Differences=[-113.039, -38.713]). Meanwhile, in the “close” SFTP
manipulation condition there was no significant difference among the groups of financial constraints (M=212.12, SD=180.25) and financial adequacy (M=216.31,
SD=201.30; F(1, 747)=0.048, p=0.827, η2p<0.001, 95% CIMean-Differences=[-33.381, 41.759]), which means that both groups that were exposed to the “close” SFTP
manipulation performed the same level of discounting, indicating that the SFTP manipulation altered the participants’ discounting behavior.
Additionally, looked at differently, in the financial constraints condition there was significant difference between the “close” SFTP manipulation condition (M=212.12,
SD=180.25) and the “control” condition (M=250.30, SD=194.03; F(1, 747)=4.079, p=0.044, η2
p=0.005, 95% CIMean-Differences=[1.068, 75.285]). This finding, supporting
our H1, indicates that the financially constrained discounted less when they were assigned to the “close” condition, in comparison to the “control” condition. Correspondingly, in the financial adequacy condition there was significant difference between the two groups of “close” (M=216.31, SD=201.30) and “control” (M=174.42,
SD=156.08; F(1, 747)=4.777, p=0.029, η2p=0.006, 95% CIMean-Differences=[79.511, -4.265]), indicating that the financially adequate discounted more in the “close”
condition. Figure 9 shows the differences between the groups.
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The Mediating Role of Subjective Future Time Perception
We have already established the connection between our IVs (financial condition and manipulation of SFTP) and SFTP (DV) in the first part of the results, which is our potential mediating variable in this moderated mediation. Therefore, we proceeded with a regression using PROCESS macro - model 8 (Hayes, 2013), in which we investigated the effect of financial condition, SFTP manipulation, their interaction term, and SFTP, on discounting. The outcome indicated a highly significant effect of SFTP on discounting (β=3.0014, SE=0.2359, p<0.001), while the interaction term of financial condition and SFTP manipulation became insignificant (β=-33.5505, SE=24.6888,
p=0.1746). This insignificant effect indicates that the mediator (SFTP) contained all
the necessary information to explain the link between our IVs and the DV, and as a result discounting was not being affected by the interaction term any longer.
Figure 10: Moderated Mediation, Effect of Mediator (SFTP) on Discounting
Taking a closer look at the indirect effects, in the “control” SFTP manipulation condition, consistent with our reasoning and supporting our H3, we found the mediating role of SFTP with respect to discounting, such that there was a link between financial condition, manipulation of SFTP, SFTP, and discounting. More specifically, in the “control” condition the mediation was significant, as zero was not included in the 95% confidence interval (Bbootstrap=-43.3620, SEbootstrap=8.8443, 95% CIbootstrap=[-61.3185, -26.7309]). However, in the “close” SFTP manipulation condition the mediation
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CIbootstrap=[-13.3662, 19.9800]). Furthermore, the overall index of the moderated
mediation with 5000 bootstrapped samples was significant, indicating that a moderated mediation took in fact place (SEbootstrap=12.6400, 95% CIbootstrap= [72.5722, -22.7689]). Figure 11 shows the conceptual model of the moderated mediation.
Figure 11: Moderated Mediation - Conceptual Diagram
Robustness Check and Ruling Out Alternative Explanations
In the second part of the analysis two other main potential mediators were examined to test the robustness of the model. The first one was mood, which was measured with positive and negative statements about the participants’ current feelings and was therefore separated to positive affect and negative affect. The second one was sense of control, which was measured with two subscales, mastery and perceived constraints. Age was also included in this analysis. Five separate ANOVAs were carried out to test the significance of each potential mediator to financial condition, SFTP manipulation, and their interaction term. All five potential mediators were found to have a highly significant main effect on financial condition, but were all insignificant to the SFTP manipulation and the interaction between financial condition and SFTP
27 manipulation. Hence, they could not be mediating our model. The following table sums up the findings from the ANOVAs.
Financial condition F SFTP manipulation F Financial condition*SFTP manipulation F Positive Affect p<0.001 16,673 p=0.920 0.010 p=0.734 0.116 Negative Affect p<0.001 20,799 p=0.279 1.174 p=0.740 0.110 Mastery p<0.001 14,763 p=0.481 0.497 p=0.112 2.528 Perceived Constraints p<0.001 22,576 p=0.378 0.778 p=0.253 1.308 Age p=0.006 7.529 p=0.528 0.399 p=0.570 0.323
Table 1: Potential Mediators and ANOVA Findings
28 Taking a closer look at the indirect effects, it is clear that while in the “control” SFTP manipulation condition the effect was still significant (Bbootstrap=-37.5978,
SEbootstrap=8.2876, 95% CIbootstrap=[-55.4610, -22.4029]), in the “close” condition the
effect had been, once again, eradicated (Bbootstrap=7.9250, SEbootstrap=8.0824, 95%
CIbootstrap=[-8.0687, 23.9212]). The overall index was also significant, meaning that
even with the inclusion of the potential mediators, the moderated mediation remained robust (SEbootstrap=11.8120, 95% CIbootstrap= [-69.4432, -23.4648).
General Discussion
Conclusions
29 manipulation of feeling future time to be closer. This finding is novel and of crucial importance, as it can be used to benefit the financially constrained by shortening their future time perception, and improving their well-being by helping them escape the poverty trap.
Limitations
Overall, this study worked as planned. The number of the participants we recruited was sufficient to show clear results. However, there is one finding that was unexpected. Specifically, we observed that people in the financially adequate condition discounted more when they perceived future time to be closer, relative to the control condition, even though their subjective future time perception was significantly shortened. Although we do not have an immediate explanation for this effect, we should highlight that this was not the main focus of this thesis. The main objective was to help the financially constrained become patient, which was attained. Additionally, our model remained significant even after the inclusion of the mentioned above covariates, and therefore, proved its robust effect.
Managerial Implications and Future Research
30 financially constrained consumer were to either buy a newly released smartphone today or open a savings account for future urgencies, after exposure to our future time manipulation and being induced of feelings that future time is closer, they would opt for saving the money for future use instead. Furthermore, our findings can be interpreted and used to combat relevant consumer issues. Taking into consideration recent statistical findings, 68% of students who graduated from non-profit and public American colleges in 2015 had student debt, which indicates a 4% increase in comparison to the class of 2014 (The Institute for College Access & Success, 2016). Therefore, our discovery could be used to decrease consumers’ debt collection. Additionally, it can be used for improving public policy. Overall, the main intention of this study was to discover a novel way of improving the well-being, and quality of life of consumers.
31
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Appendix
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