Temporal discounting refers to the tendency of people to discount rewards as they approach a temporal horizon in the future or the past (i.e., become so distant in time that they cease to be valuable or to have additive effects). To put it another way, it is a tendency to give greater value to rewards as they move away from their temporal horizons and towards the "now". For instance, a nicotine

Nicotine

Nicotine is an alkaloid found in the nightshade family of plants that constitutes approximately 0.6–3.0% of the dry weight of tobacco, with biosynthesis taking place in the roots and accumulation occurring in the leaves...

 deprived smoker may highly value a cigarette available any time in the next 6 hours but assign little or no value to a cigarette available in 6 months .

This term is used in intertemporal economics, intertemporal choice

Intertemporal choice

Intertemporal choice is the study of the relative value people assign to two or more payoffs at different points in time. Most choices require decision-makers to trade-off costs and benefits at different points in time. These decisions maybe about savings, work effort, education, nutrition,...

, neurobiology of reward

Reward system

In neuroscience, the reward system is a collection of brain structures which attempts to regulate and control behavior by inducing pleasurable effects...

 and decision making, microeconomics

Microeconomics

Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...

 and recently neuroeconomics

Neuroeconomics

Neuroeconomics is an interdisciplinary field that seeks to explain human decision making, the ability to process multiple alternatives and to choose an optimal course of action. It studies how economic behavior can shape our understanding of the brain, and how neuroscientific discoveries can...

 . It is also known as delay discounting or time discounting. Traditional models of economics assumed that the discounting function is exponential in time leading to a monotonic decrease in preference with increased time delay; however, more recent neuroeconomic models suggest a hyperbolic discount function

Hyperbolic discounting

In behavioral economics, hyperbolic discounting is a time-inconsistent model of discounting.Given two similar rewards, humans show a preference for one that arrives sooner rather than later. Humans are said to discount the value of the later reward, by a factor that increases with the length of the...

 which can address the phenomenon of preference reversal

Preference reversal

Offered a choice of $100 today and $110 in a month, subjects might prefer to have $100 today. However, if the delay for both rewards is increased by a year (i.e., subjects are offered a choice of $100 in a year or $110 in a year and one month), they might prefer the $110.

See also

• Time preference
  Time preference
  In economics, time preference pertains to how large a premium a consumer places on enjoyment nearer in time over more remote enjoyment....
  
  
• Discount function
  Discount function
  A discount function is used in economic models to describe the weights placed on rewards received at different points in time. For example, if time is discrete and utility is time-separable, with the discount function...
  
  
• Intertemporal choice
  Intertemporal choice
  Intertemporal choice is the study of the relative value people assign to two or more payoffs at different points in time. Most choices require decision-makers to trade-off costs and benefits at different points in time. These decisions maybe about savings, work effort, education, nutrition,...
  
  
• Decision theory
  Decision theory
  Decision theory in economics, psychology, philosophy, mathematics, and statistics is concerned with identifying the values, uncertainties and other issues relevant in a given decision, its rationality, and the resulting optimal decision...
  
  
• Discounted utility
  Discounted utility
  Discounted utility is an economics term in which economists, accountants, underwriters, and other financial analysts include the future discounted value of a good in its present value...