DISCOUNTING OF DELAYED REWARDS - MODELS OF INDIVIDUAL CHOICE

The present paper addresses the question of the form of the mathematic al relation between the time until a delayed reward and its present va lue. Data are presented from an experiment in which subjects chose bet ween hypothetical amounts of money available either immediately or aft er a delay (Green, Fry, & Myerson, 1994). Analyses of the behavior of individual young adults demonstrated that temporal discounting is bett er described by hyperbola-like functions than by exponential decay fun ctions. For most individuals, the parameter that determines the rate o f discounting varied inversely with amount. Raising the denominator of the discounting function to a power resulted in better descriptions o f the data from most subjects. Two possible derivations of the tempora l discounting function are proposed, a repeated choice model and an ex pected value model. These provide theoretical interpretations for amou nt-dependent discounting but amount-independent exponent parameters.