This theory states that humans discount the value of a later reward, by the factor that increases with the length of the delay.
It's mathematically described as:
where is the discount factor that multiples the reward's value, is the delay, and is the factor governing the degree of discounting.
This is the reason that humans prefer short-term to long-term rewards.
It reveals a tendency to make choices that are inconsistent over time.
- We regret some decisions we made in the past, despite knowing the same information.