A person prefers $50 today to $100 a year from now but prefers $100 in six years to $50 in five years. This best describes the behavioral bias of _____.
A) sunk cost fallacy
B) hyperbolic discounting
C) falling prey to framing effect
D) overconfidence

Question

Quizplus · Accepted Answer

This behavior is an example of hyperbolic discounting, where the value of future rewards decreases more significantly as the delay to receive those rewards increases, but this effect lessens over longer delays. This leads to inconsistent preferences over time, as seen in the preference for a smaller-sooner reward over a larger-later reward in the short term, but a reversal of this preference over longer time horizons.

A Person Prefers $50 Today to $100 a Year from Now