Today I learn a new term ‘Hyperbolic Discounting’.
Given two similar rewards, humans show a preference for one that arrives sooner rather than later. Humans are said to discount the value of the later reward, by a factor that increases with the length of the delay. This process is traditionally modeled in form of exponential discounting, a time-consistent model of discounting.
However, it has been proven that exponential discounting is not true all the time. In hyperbolic discounting, valuations fall very rapidly for small delay periods, but then fall slowly for longer delay periods. The ability to make rational choices when they’re thinking about the future, but, as a future event gets closer, short-term considerations overwhelm their long-term goals.
Hyperbolic discounting is the term behavioral economists used to study procrastination, which is really one of the major shortfalls I have.
While on the subject of procrastination, The New Yorker has an excellent read on this.
