Intertemporal choice

Intertemporal choice is decision-making that weighs costs and benefits occurring at different times. It includes choices between smaller, sooner outcomes and larger, later ones.

Temporal discounting: The reduction in an outcome’s subjective value as the time until its receipt increases. Discounting captures how delay changes the value assigned to future costs and benefits.
Utility: A representation of how desirable an outcome is to a decision-maker. Intertemporal models compare subjective utility, not just amounts of money or goods.
Life-cycle hypothesis: An economic theory that people plan consumption over their lifetimes to smooth changes in income. It applies intertemporal planning to saving and consumption across a lifespan.
Discounted utility model: An economic framework that represents intertemporal preferences through time-discounted utility. It is the classic formal account of how outcomes at different dates are compared.
Hyperbolic discounting: A discounting pattern in which subjective value falls steeply for short delays and less steeply for longer ones. It predicts preference reversals when a tempting reward becomes immediate.
Time preference: A preference concerning when an outcome occurs, holding other features constant. It isolates the value assigned to timing itself.
Hyperbolic discounting in public health: The use of hyperbolic discounting to analyze health choices whose costs and benefits occur at different times. Preventive care often requires immediate effort for benefits that arrive much later.
Quasi-hyperbolic discounting: A model that applies an extra discount to all future periods while discounting later periods exponentially. It provides a tractable model of present bias in planning and policy.
Exponential discounting: A discounting model in which value declines at a constant proportional rate over time. Its stable preferences contrast with the reversals predicted by hyperbolic discounting.
Opportunity cost: The value of the best alternative forgone when a choice is made. Choosing a delayed outcome can mean giving up what is available sooner.

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