Time discounting research, which investigates differences in the relative valuation placed on rewards (usually money or goods) at different points in time, by comparing its valuation at an earlier date with one for a later date (Frederick, Loewenstein, & O’Donoghue, 2002), shows that present rewards are weighted more heavily than future ones. Once rewards are very distant in time, they cease to be valuable. Delay discounting can be explained by impulsivity and a tendency for immediate gratification, and it is particularly evident for addictions such as nicotine (Bickel, Odum, & Madden, 1999). Hyperbolic discounting theory suggests that discounting is not time-consistent; it is neither linear nor occurs at a constant rate. It is usually studied by asking people questions such as “Would you rather receive £100 today or £120 a month from today?” or “Would you rather receive £100 a year from today or £120 a year and one month from today?” Results show that people are happier to wait an extra month for a larger reward when it is in the distant future. In hyperbolic discounting, values placed on rewards decrease very rapidly for small delay periods and then fall more slowly for longer delays (Laibson, 1997).
Bickel, W., Odum, A., & Madden, G. (1999). Impulsivity and cigarette smoking: Delay discounting in current, never, and ex-smokers. Psychopharmacology, 146(4),447-454.
Frederick, S., Loewenstein, G., & O’Donoghue, T. (2002). Time discounting and time preference: A critical review. Journal of Economic Literature, 40, 351-401.
Laibson, D. (1997). Golden eggs and hyperbolic discounting. Quarterly Journal of Economics, 112, 443-477.