Magnitude effect
Big rewards are discounted more patiently than small ones.
What it means
The magnitude effect is the robust finding that the implicit discount rate falls as the size of the delayed reward rises, so people are more willing to wait for large amounts than for small ones. Someone might demand a steep premium to wait a year for $10 but accept a far gentler rate to wait the same year for $1,000. This dependence on amount violates the discounted utility model, which assumes a single discount rate independent of magnitude. The effect complicates any attempt to summarize a person's patience with one number and is one of several anomalies — alongside the sign and delay-speedup effects — that motivated descriptive alternatives. It has practical bite for how savings incentives and reward sizes are designed.
Examples
A person who insists on $15 to wait a year instead of taking $10 now will happily wait that same year to turn $1,000 into $1,050.
A shopper will not wait three days for delivery to save $3 on a phone case, but happily waits three weeks to save $300 on the sofa.
Offered their tax refund early for a fee, people snap up a small refund now yet leave a large one to arrive on time — patience grows with the sum.
First described in Thaler (1981); Loewenstein & Prelec (1992).