Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts · chapter 6 · id thinking-in-bets-c6-06-temporal-discounting----the-te
“Temporal discounting -- the tendency to overweight immediate rewards relative to future rewards -- follows a hyperbolic rather than exponential curve, leading to time-inconsistent preferences (Thaler, 1981).”
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Wikipedia, Hyperbolic discountingsource alive
Since Thaler (1981), behavioral economists have gathered significant evidence that decision makers behave in ways incompatible with exponential discounting. Hyperbolic functions consistently provided more accurate descriptions of data.
The Decision Lab, 'Hyperbolic Discounting'source alive
The most important consequence of hyperbolic discounting is that it creates temporary preferences for small rewards that occur sooner over larger, later ones. Decision makers' per-period impatience decreases as the interval grows.
PMC (2012), 'Evidence for Hyperbolic Temporal Discounting of Reward in Control of Movements'source alive
Hyperbolic discounting is more consistent with behavioral data in humans and monkeys than exponential discounting.
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