Time Preference Theory

Time Preference Theory suggests that people value immediate rewards more highly than future ones, which influences their decisions. For example, choosing to spend money now rather than saving it for the future reflects a higher preference for immediate gratification. Conversely, those willing to delay gratification for a larger future benefit have a lower time preference. This concept helps explain behaviors like saving, investing, and consumption, highlighting how individuals prioritize immediate versus delayed outcomes based on their preferences for present versus future benefits.