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Hyperbolic discounting

In behavioral economics, hyperbolic discounting refers to the empirical finding that people generally prefer smaller payoffs to larger payoffs when the smaller payoffs come sooner in time than the larger; when all the payoffs are either distant or proximal in time, people tend to prefer the larger. The phenomenon of hyperbolic discounting was first discovered and the term first used by Richard Herrnstein in experiments involving pigeons and food (Chung and Herrnstein, 1967) and later reproduced with human subjects.

For instance, when offered the choice between $50 now and $100 a year from now, most people will choose the immediate $50. However, given the choice between $50 in five years or $100 in six years most people will choose $100 in six years. In addition, given the choice between $50 today or $100 tomorrow, most people will choose $100 tomorrow.

The functional equation for hyperbolic discounting is as follows: v = V / (1 + kD)

see also double money in a given time Discount: net present value Cash accumulation equation ROI - Return on Investment - Rate of return Future value newest formulas Acceleration Calculating a weighted average Pregnancy Date Calculator Fill the yellow fields to see the result in the green fields!   A B C 1 undiscounted value of the reward V      2 delay in the reward D      3 degree of discounting k      4       5 discounted value of the reward v      © formularium.org was this helpful ? see also: http://en.wikipedia.org/wiki/Hyperbolic_discounting link: http://formularium.org?go=69 (use this link to publish this page) Export:  Excel-Export Script: <script src="http://formularium.org/js.php?go=69"></script> (use this script to include this spreadsheet onto your own webpageExport)   (source: Hyperbolic discounting. (2006, September 6). In Wikipedia, The Free Encyclopedia. Retrieved 20:08, November 20, 2006, from http://en.wikipedia.org/w/index.php?title=Hyperbolic_discounting&oldid=74058441) did you know that you can integrate any formula into your own homepage? try it! insert this code into your page: <script src="http://formularium.org/js.php?go=69"></script>