Glossary
Time discounting
What is time (temporal) discounting?
Time discounting, also called temporal discounting, describes how an outcome's timing affects its value in a present choice. It is often studied by comparing a smaller reward sooner with a larger reward later.
Choosing sooner is not automatically a mistake. Risk, uncertainty, and an immediate need for money can matter alongside a preference for immediacy.
Exponential and hyperbolic discounting
Exponential discounting uses a constant proportional discount rate. Hyperbolic and quasi-hyperbolic models capture patterns such as a disproportionate preference for immediacy and possible preference reversals. No single curve describes all human choices.
Example of a preference reversal
You might prefer $110 in 31 days to $100 in 30 days. But offered $100 today or $110 tomorrow, you might choose the $100. The one-day gap is the same; making one option immediate changes the choice.
Why it matters
Future benefits compete with present needs and costs. Frederick, Loewenstein, and O'Donoghue's review emphasizes separating time preference from the other influences on intertemporal choice.