Presentbias

Present bias is the tendency to place greater value on immediate rewards than on future ones, even when waiting yields a larger payoff. It is a form of time preference that can lead to time-inconsistent choices and is a central feature of hyperbolic discounting in behavioral economics. In intertemporal decisions, people may choose a smaller reward today over a larger one tomorrow, but may opt for the larger payoff when both options are delayed.

The standard theoretical approach models present bias with quasi-hyperbolic discounting. A common representation is U = u0 + beta times sum from t=1 to infinity of delta^t u_t, where 0 < beta <= 1 and 0 < delta <= 1. When beta < 1, immediate rewards loom larger than future ones, whereas exponential discounting corresponds to beta = 1.

Empirical evidence appears across domains such as saving for retirement, health behaviors, and education. People often undersave for retirement, skip preventive health actions, or prefer immediate gratification in dieting, even when long-run benefits are clear.

Mitigating present bias involves commitment devices and behavioral nudges that align short-run incentives with long-run goals. Examples include automatic enrollment and escalation in savings plans, default options, reminders, and simplification of choices, as well as precommitment contracts to restrict impulsive options.

Critics note measurement challenges, heterogeneity, and context dependence. Present bias is a useful general explanation for many intertemporal choices but may not apply uniformly; some observed behavior may reflect liquidity constraints, risk, misperception, or domain-specific preferences. Ongoing research examines causes, magnitude, and policy effectiveness.