discounting
The psychological or financial practice of placing lower value on future rewards compared to immediate ones.
In behavioral economics, hyperbolic discounting explains why people act against their own long-term interests for quick gratification.
Word relationships
- devaluing: Devaluing means lowering worth in general; discounting in economics specifically refers to reducing value across time.
- depreciating: Depreciating implies physical wear or market loss over time, whereas discounting reflects psychological preference for immediate rewards.
- compounding: Compounding accumulates and increases future financial value over time.
Commonly confused with
- depreciation: Depreciation is the physical loss of asset value over time; discounting is the subjective reduction in worth assigned to delayed outcomes.
Word family
- discount (verb): To reduce the present estimation of future value.
- discounted (adjective): Reduced in value or regarded with diminished weight.
Collocations
- temporal discounting
- hyperbolic discounting
- discounting rate
- delay discounting
Idioms & expressions
- a bird in the hand is worth two in the bush
Example sentences
- "Temporal discounting explains why individuals struggle to save money for retirement despite knowing its long-term importance." Behavioral finance paper
- "Hyperbolic discounting leads to time-inconsistent preferences, causing individuals to delay unpleasant tasks." Economic modeling text
Memory hook
DISCOUNTING future rewards means putting them on sale—they feel worth less because they are far away. Discounting = Devaluing future rewards for immediate pleasure.
When not to use
Do not confuse hyperbolic time discounting with simply placing items on sale in a retail store, though both use the same base word.
Fun facts
- Pigeons and rats display steep hyperbolic discounting in lab tests, preferring 1 pellet right now over 5 pellets in ten seconds!
Related words
Explore more words
disincentive, Rebate, devalue, Depreciation, impulsive, anchoring
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