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In behavioral economics, time preference (or time discounting, [1] delay discounting, temporal discounting, [2] long-term orientation [3]) is the current relative valuation placed on receiving a good at an earlier date compared with receiving it at a later date. [1] Applications for these preferences include finance, health, climate change.
The phenomenon of hyperbolic discounting is implicit in Richard Herrnstein's "matching law", which states that when dividing their time or effort between two non-exclusive, ongoing sources of reward, most subjects allocate in direct proportion to the rate and size of rewards from the two sources, and in inverse proportion to their delays. [8]
Time discounting or temporal discounting is a wide range of ideas involving the connection between time and the extent to which an object, situation, or course of action is seen as valuable. The overall theory is that people put more value and worth into immediate events and outcomes, and apply less value to future outcomes or events.
If they did not eat the marshmallow, the reward was either another marshmallow or pretzel stick, depending on the child's preference. In follow-up studies, the researchers found that children who were able to wait longer for the preferred rewards tended to have better life outcomes, as measured by SAT scores , [ 2 ] educational attainment, [ 3 ...
Hyperbolic discounting, where discounting is the tendency for people to have a stronger preference for more immediate payoffs relative to later payoffs. Hyperbolic discounting leads to choices that are inconsistent over time—people make choices today that their future selves would prefer not to have made, despite using the same reasoning. [52]
In real world situations, "discounting makes sense because of the inherent uncertainty of future payoffs". [55] One study looked at how reward discounting is context specific. [18] By differing the time and space between small and large rewards, they were able to test how these factors affected the decision making in tamarins and marmosets ...
Exponential discounting yields time-consistent preferences. Exponential discounting and, more generally, time-consistent preferences are often assumed in rational choice theory, since they imply that all of a decision-maker's selves will agree with the choices made by each self. Any decision that the individual makes for himself in advance will ...
Time discounting (or time preference) is the tendency to weigh present events over future events. Immediate gratification is preferred to delayed gratification, especially over longer periods of time and with younger children or adolescents. [ 37 ]