- See also
- References
A discount function is used in economic models to describe the weights placed on rewards received at different points in time. For example, if time is discrete and utility is time-separable, with the discount function 
having a negative first derivative and with 
(or 
in continuous time) defined as consumption at time t, total utility from an infinite stream of consumption is given by
.
Total utility in the continuous-time case is given by
provided that this integral exists.
Exponential discounting and hyperbolic discounting are the two most commonly used examples.
See also
- Discounted utility
- Intertemporal choice
- Temporal discounting
References
For a comprehensive review, see:
- Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, vol. 40(2), pages 351-401, June.
1 : Intertemporal economics
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