Discounted Utility Theory

Discounted Utility Theory is a concept in economics and decision-making that suggests people value future benefits less than immediate ones. Essentially, when making choices, individuals tend to prefer receiving a smaller reward now rather than waiting for a larger reward later. The theory quantifies this preference by applying a "discount rate" to future benefits, reflecting their reduced value over time. This framework helps explain behaviors like procrastination or why someone might choose instant gratification despite potential long-term gains. It highlights the importance of timing in how we evaluate our options.