Hyperbolic versus exponential discounting

The red lines show hyperbolic discounting. The green lines show exponential discounting (constant discount rate).

Present Value (PV)

Time

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Sensitivity (hyperbolic)

Discount rate (exponential)

Discount Rate

Time

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This page by Martin Poulter of the Economics Network is released under a Creative Commons by-nc licence.

See also Hyperbolic discounting and preference reversal