I’d like my discount now—or do I?

July 27, 2012 at 2:58 pm

I don’t know about you but I always look for a good deal. The idea of a 2 for 1 or 50% off draws me like a magnet to further investigate what the opportunity might offer. Whether we are purchasing groceries, clothing, books, music, or even an evening meal, our native human behavior seeks out what seems to us to be a great deal. Of course, it may also be we end up purchasing something we either didn’t need or was a marginal desire, but the lure of a “deal” drew us in.

But there is an additional element to the draw of a good deal, that of obtaining a discount. And we as humans innately believe that with our superior intelligence, we have the ability to logically assess whether the discount is worthy of our interest. After all, that’s why we’re the superior race, isn’t it?

But as I continue to expand my interest in behavioral economics, and the intriguingly named “social neuroscience,” I’m becoming acutely aware that there are gaps in my knowledge and defects in my capabilities regarding that assessment capability. For while we harbor a personal bias that we’re able to identify a valuable discount, the reality is that our ability to assess a discount’s value is impacted by many underlying vagaries of human behavior. Not the least of those is whether an immediate discount is of superior value to one which would come due in the future.
But why is this of interest to me in my work in health care? Fundamentally, it’s caused me to appreciate that in addition to all the challenges we already have identified in addressing behavior change, we have evolving knowledge of another attribute that will frustrate our efforts—our personal immediate discount rate.

In a recent book Wait, The Art of Delay, Frank Partnoy addresses many issues important in understanding when delay (which some might label procrastination) is appropriate. Additionally, he addresses our need to understand the impact of an individual’s “discount rate” as it impacts that delay. If I’m given the following offer—would you take $100 today or $110 in a week, which would you take—if you don’t eat that cheeseburger and fries today, you may in the long run live a longer, healthier life, etc., etc. What is our immediate need for gratification, and how is it balanced against what might be a long-term benefit, but not immediately available to me?

Multiple studies have revealed that people often do poorly in balancing the benefit of these discounts. If we have a “high immediate discount rate,” we will take the immediate offer, and not think of the long-term implications. So if imbedded in my brain is a tendency to a satisfy a high immediate need, I’ll take that $100 today, because it’s not worth waiting that 7 days for a larger reward.

Let’s think about that in terms of what we’re often asking our patients to do in addressing their health. We’re often asking them to eat healthy (look past that cheeseburger), exercise regularly (even if you’re tired, and don’t feel you have the time), get adequate rest, drink less alcohol, all in the hope they will live a few years longer in the distant future. While that is laudable, if you examine it in the context of discount rates, if that person we’re asking this behavior of has a high discount rate, despite our strongest urgings and our heartfelt pleas, and perhaps even with their initial agreement, we all too often know what happens—pass me the ketchup for that cheeseburger, and another beer please. That’s what some will call “non-compliance” which appeases our sense of responsibility.

Why does this cause me to pause? Research has shown that there are several attributes associated with high immediate discount rates (driving me to that immediate gratification). Those who are under educated, poor, obese, have job uncertainties, are all prone to high immediate discount rates.

We need to understand and incorporate this into any of our work in improving the health of our citizens. For despite all of our efforts in health care at engaging patients, attempting to involve them as partners in managing their health, we will be challenged by the environment in which they live. If we fail to address the social determinants of health—poverty, education, public health, jobs, etc. I fear our efforts will be limited in success. That high immediate discount rate which impacts our behavior is a big part of our society today. What can we do to address that as we confront the many challenges we face in health care? Is our discounted offering compatible with the world they live in?

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