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Temporal discounting (also known as delay discounting, time discounting) [12] is the tendency of people to discount rewards as they approach a temporal horizon in the future or the past (i.e., become so distant in time that they cease to be valuable or to have addictive effects). To put it another way, it is a tendency to give greater value to ...
The theory states an individual's motivation for a task can be derived with the following formula (in its simplest form): = where , the desire for a particular outcome, or self-efficacy is the probability of success, is the reward associated with the outcome, is the individual’s sensitivity to delay and is the time to complete that task.
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.
The Stanford marshmallow experiment was a study on delayed gratification in 1970 led by psychologist Walter Mischel, a professor at Stanford University. [1] In this study, a child was offered a choice between one small but immediate reward, or two small rewards if they waited for a period of time.
Hyperbolic discounting is mathematically described as = + where g(D) is the discount factor that multiplies the value of the reward, D is the delay in the reward, and k is a parameter governing the degree of discounting (for example, the interest rate).
The term of present bias was coined in the second half of the 20th century. In the 1930s economic research started investigating time preferences. The findings led to the model of exponential discounting, thus time consistent discounting. However, later research led to the conclusion that time preferences were indeed not consistent, but ...
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 ...
When considering longer time periods, a fixed "pure time preference" discount rate becomes extremely counterintuitive; a 1% rate implies that Tutankhamun should ethically value a single day of his life over the sum total entire lives of everyone living today. Over long periods, peoples' stated preferences become extremely hyperbolic. [4]