Hyperbolic Discounting

Hyperbolic discounting is a pattern of time preference in which people discount the value of future rewards more steeply for delays occurring sooner than for equally long delays occurring further in the future, producing preferences that reverse depending on when the choice is made. It contrasts with the exponential discounting model traditionally assumed in economics, under which the discount rate is constant over time, and the psychologist George Ainslie, whose foundational work dates to the 1970s, used hyperbolic discounting to explain phenomena such as procrastination and preference reversals, where a person prefers a larger reward available later when planning in advance but switches to prefer a smaller, sooner reward once that sooner option becomes immediately available. The pattern has been influential in behavioral economics models of self-control and intertemporal choice.