What Is Hyperbolic Discounting In Behavioral Economics?

Hyperbolic discounting is a phenomenon in which people have a tendency to value immediate rewards more highly than future rewards. This can happen because people tend to value rewards that are received sooner more highly than rewards that are received later, even if the later rewards are larger or more valuable. For example, if you are offered a small reward now or a larger reward in the future, you may choose the small reward now because it is available immediately, even though the larger reward in the future would be more valuable. Hyperbolic discounting can lead to errors in judgment and decision-making, as it can cause people to prioritize short-term gains over long-term benefits, and to make choices that are not in their best interest in the long run. To avoid hyperbolic discounting, it is important to carefully evaluate the value of immediate and future rewards, and to make decisions that take into account the long-term benefits and consequences of different options.

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