Hyperbolic Discounting

Image: icyte.com

It is the tendency for people to prefer a smaller, immediate payoff over a larger, delayed payoff.  Would you rather have me give you $20 right now or $100 a year from now?  Most people would choose the $20 today.   Multiple studies show this.  On a larger scale, hyperbolic discounting is what accounts for lottery winners taking a fraction of their prize in a lump sum instead of getting the whole thing paid in annuities over time.  Ever see those “I need cash now” commercials?  Companies make a good deal of money from this.

Feedback & Recommendations

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: