Business Case Studies & Business Publications

Behavioral Time Discounting

Baucells, Manel

Technical Note

Behavioral Time Discounting

Baucells, Manel

QA-0896 | Published March 8, 2018 | 11 pages Technical Note

Collection: Darden School of Business

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Many decisions involve trade-offs between present and future costs and benefits. We procrastinate difficult tasks, and we forgo larger rewards for smaller ones if we can get them sooner. Why do we change our minds about the value of upcoming events? The traditional discounting model, which predicts how individuals discount future consequences and resolve trade-offs between present and future costs and benefits, does not account for this observed behavior. The behavioral discounting model presented in this technical note accounts for observed behaviors by incorporating patterns of overall high discounting, magnitude effects, and decreasing impatience.