As humans, we often struggle with delaying gratification, especially when a reward is right before our eyes. This behavioral phenomenon, known as hyperbolic discounting, is a concept that not only tells us a lot about our decision-making patterns but also carries significant implications for areas such as personal finance, health, and even product design.
What is Hyperbolic Discounting?
Hyperbolic discounting refers to the tendency for people to increasingly choose a smaller-sooner reward over a larger-later reward as the delay occurs sooner rather than later. It's why many children, promised a second marshmallow if they do not immediately eat the first one, cannot wait. The concept underlines an essential truth about human nature: the closer a reward is in sight, the harder it is to postpone it. We cannot, after all, live every day as if it were our last1.
Hyperbolic Discounting in Everyday Life
Impulsive Shopping
Have you ever made an impulsive purchase even though you're trying to save money for a more significant future goal? That's hyperbolic discounting at work. The immediate pleasure of owning something new often outweighs the future satisfaction of achieving a financial goal.
Health Choices
Ever chosen a tasty but unhealthy meal over a healthier option because the immediate satisfaction outweighs the future health benefits? Once again, that's hyperbolic discounting. The immediate gratification of taste often triumphs over the delayed benefits of healthy eating.
Procrastination
Ever put off an important task to enjoy a moment of leisure? You guessed it—that's hyperbolic discounting. The immediate pleasure derived from relaxing or engaging in a fun activity often takes precedence over the future benefits of completing the task.
Hyperbolic Discounting in Digital Product Design
Understanding hyperbolic discounting can significantly influence how we design digital products.
User Engagement
Features like push notifications and real-time updates exploit hyperbolic discounting, offering immediate gratification (e.g., social validation from a like or comment) to keep users engaged.
In-App Purchases
Many mobile games offer in-app purchases that provide immediate advantages (like power-ups or extra lives), banking on users' tendency to choose immediate rewards over the delayed satisfaction of progressing through the game naturally.
Digital Marketing
Marketers often create a sense of urgency (limited time offers, countdown timers, etc.) to prompt immediate purchases, capitalizing on the fact that consumers are more likely to buy when the reward (the product or deal) is immediate.
In conclusion, hyperbolic discounting is an integral part of our decision-making process, influencing our choices in ways we often don't realize. By understanding this concept, we can not only make more informed decisions in our personal lives but also design digital products that better cater to user behavior.