Hyperbolic discounting
We discount the near future steeply but the distant future only gently.
What it means
Hyperbolic discounting describes the empirical finding that the subjective value of a reward falls sharply for short delays but much more gradually for longer ones, in contrast to the constant per-period decline assumed by exponential discounting. Because the discount curve is steeply bowed near the present, the relative valuation of two future rewards changes as time passes, which produces preference reversals: a far-sighted choice made in advance is overturned once the smaller, sooner reward becomes imminent. Ainslie identified this dynamic, and Laibson's quasi-hyperbolic 'beta–delta' model captures it tractably by adding a single extra discount factor that applies to everything beyond the immediate present, separating a 'present bias' parameter from ordinary long-run patience. A live debate concerns whether the hyperbolic shape reflects a genuine discounting curve or emerges from other processes — such as uncertainty about the future, attention, or the bundling of rewards — and whether it is best modeled as a unitary system or as competition between distinct valuation systems. It matters because this curvature is the formal engine behind procrastination, under-saving, addiction, and broken resolutions, and it explains why commitment devices that remove the tempting near-term option can succeed where willpower alone fails.
Examples
You prefer $110 in 31 days to $100 in 30 days today, yet once that 30th day arrives you flip and grab the $100 rather than wait one more day.
You firmly intend to save half of next year's bonus. When the money lands, the holiday is bookable today, and the plan quietly becomes next year's plan again.
At eleven at night, tomorrow's six o'clock run looks like an obviously good trade. At one minute to six, nine more minutes of sleep outbid a year of fitness.
First described in Ainslie; Laibson's quasi-hyperbolic (β–δ) model (1997).