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What is a hyperbolic discounting?

 

 The definition of hyperbolic discounting


 Hyperbolic discounting ​​refers to a cognitive bias that values ​​present values ​​high and future values ​​low. It is also called present bias because it places more weight on the present.

Characteristics of hyperbolic discounting



   Due to hyperbolic discounting, they think differently about the value of money received now and money received in the future. 


  If the two rewards are similar, we think the current reward is valued more than future reward.

  Hyperbolic discounting arises from uncertainty about the future. Let's look at the old ways of human survival. In the era of hunting, the food of today was more valuable than the food of the future. In other words, hyperbolic discounting was a means of survival.

An example of hyperbolic discounting



An example of hyperbolic discounting is a discount coupon that does not make much difference. Which of these two coupons would you choose?


Usually, you choose the former from the above two coupons. If it is a reasonable choice, it is correct to choose the latter coupon, but due to hyperbolic discounting, you will be choosing a coupon that can be used immediately. Instead of waiting a month and getting a $13 coupon, choose a coupon that is $10 but can be used immediately.


Summarizing three lines of hyperbolic discounting


 - Hyperbolic discounting causes the present value to be judged more valuable than the future value.
- Hyperbolic discounting arises from uncertainty about the future.
- Hyperbolic discounting was a means of survival.

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