Editing Time preference (section)

{{Short description|Difference in valuation of a payoff when receiving it earlier versus later}}
{{About|time preference in economics|time preference in psychology|Delayed gratification}}

In [[behavioral economics]], '''time preference''' (or '''time discounting''',<ref name=":0">{{Cite journal |last1=Frederick |first1=Shane |last2=Loewenstein |first2=George |last3=O'donoghue |first3=Ted |date=2002 |title=Time Discounting and Time Preference: A Critical Review |url=http://e.guigon.free.fr/rsc/article/FrederickEtAl02.pdf |journal=Journal of Economic Literature |volume=40 |issue=2 |pages=351–401 |doi=10.1257/jel.40.2.351 |archive-url=https://web.archive.org/web/20170311162045/http://e.guigon.free.fr/rsc/article/FrederickEtAl02.pdf |archive-date=2017-03-11 |access-date=2014-11-02}}.</ref> '''delay discounting''', '''temporal discounting''',<ref>{{Cite journal|last=Doyle|first=John R.|date=2013|title=Survey of time preference, delay discounting models|url=http://journal.sjdm.org/12/12309/jdm12309.pdf|journal=Judgment and Decision Making|volume=8|issue=2|pages=116–135|doi=10.1017/S1930297500005052 }}</ref> '''long-term orientation'''<ref>{{Cite book|title=Culture's consequences: Comparing values, behaviors, institutions and organizations across nations|last=Hofstede|first=Geert|publisher=Sage publications|year=2001}}</ref>) is the current relative [[Valuation (finance)|valuation]] placed on receiving a [[Goods|good]] at an earlier date compared with receiving it at a later date.<ref name=":0" /> Applications for these preferences include finance, health, and climate change.

Time preferences are captured mathematically in the [[discount function]]. The main models of discounting include exponential, hyperbolic, and quasi hyperbolic. The higher the time preference, the higher the discount placed on [[Returns (economics)|returns]] receivable or costs payable in the future.

Several factors correlate with an individual’s time preference, including age, income, race, risk, and temptation. On a larger level, ideas such as sign effects, sub-additivity, and the elicitation method can influence how people display time preference. Time preference can also inform wider preferences about real world behavior and attitudes, such as pro-social behavior. Cultural differences can explain differences in discounting as they both have similar underlying psychological influences. The discount rate is also useful in many fields, such as finance and climate change.