hyperbolic utility function

A hyperbolic utility function describes how people's satisfaction or value from receiving a certain amount of a good or benefit decreases as that amount increases, but at a slowing rate. Unlike linear functions, it shows diminishing returns, meaning each additional unit provides less extra satisfaction than the one before. This model captures behaviors like patience or preference for immediate over delayed rewards, reflecting that people value small amounts of gains more when they are small and become less sensitive to larger increases as they grow bigger. It’s useful for understanding how individuals make decisions involving trade-offs over time or uncertain outcomes.