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 formulasVariables
fHD | The discount factor that multiplies the value of the reward (dimensionless) |
k | Parameter governing the degree of discounting (dimensionless) |
D | The delay in the reward (dimensionless) |