About: Discount function

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.