Time and risk preferences, and consumption decisions of patients with clinical depression

an article by Ya‘akov M. Bayer and Nimrod Grisaru (Be'er Sheva Mental Health Center, Be'er Sheva, Israel; Ben Gurion University of the Negev, Be'er Sheva, Israel), Zeev Shtudiner (Ariel University, Israel) and Oxsana Suhorukov (Be'er Sheva Mental Health Center, Be'er Sheva, Israel) published in Journal of Behavioral and Experimental Economics Volume 78 (February 2019)

Highlights

• Clinical depression affects economic decisions of individuals.
• Individuals suffering from clinical depression are more likely to prefer current consumption over future consumption, compared to healthy individuals.
• Individuals suffering from clinical depression tend to be less economically efficient than healthy individuals.
• Individuals suffering from clinical depression tend to take more economic risks than healthy individuals.

Abstract

Clinical depression has significant influence on an individual's behavior and decision making.

This study examines how depression affects the economic decision making of individuals with clinical depression, looking specifically at time preference (subjective discount rate), attitude toward risk, and economic conduct.

For this purpose, structured questionnaires were distributed to patients with clinical depression at the Be'er Sheva Mental Health Center and a control group of similar size, and with similar demographic characteristics. The questionnaire included questions for assessing the level of depression (processed by a physician), and questions on economic conduct, time preference, and risk preference.

The study found that the participants’ level of depression correlated with their economic decisions, time preference and economic conduct, and that there is a significant gap in many aspects of economic decision making between individuals with different levels of depression, and healthy individuals.

On one measure of risk preference, individuals with depression showed signs of taking more risks, but there was no uniform trend indicating a disparity between individuals with depression and healthy individuals in other measures of risk preference. Our main conclusion is that clinical depression has broad, significant impact on the economic decisions of those who suffer from it, and it may harm the short- and long-term economic situation of patients.

In light of the above, it is important that individuals with depression, their relatives and therapists be aware of this tendency, and take it into consideration when recommending rehabilitation and social programs.

JEL classification: I12, G41

Full text (PDF 8pp)

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