Hyperbolic discounting

Description

Discounting is a financial mechanism in which a debtor obtains the right to delay payments to a creditor, for a defined period of time, in exchange for a charge or fee. In economics, hyperbolic discounting is a time-inconsistent model of discounting. In hyperbolic discounting, valuations fall very rapidly for small delay periods, but then fall slowly for longer delay periods.

Related formulas

Variables

fHDThe discount factor that multiplies the value of the reward (dimensionless)
kParameter governing the degree of discounting (dimensionless)
DThe delay in the reward (dimensionless)