Discounted Utility

Discounted utility is a concept in economics and decision-making that explains how people value rewards or benefits received in the future compared to those received immediately. Essentially, it suggests that people tend to prefer receiving something now rather than later, even if the future reward is larger. This is because individuals "discount" future benefits, meaning they perceive them as less valuable due to factors like uncertainty and the desire for immediate satisfaction. By applying a "discount rate," we can understand how choices are influenced by the timing of benefits or gains.