{"id":1111,"slug":"frederick-loewenstein-odonoghue-2002-hyperbolic-discounting","title":"Frederick, Loewenstein, O'Donoghue 2002 (JEL) — hyperbolic / quasi-hyperbolic discounting; discount rates decline with horizon; gains discounted more steeply than losses","kind":"reference","scope":"business","status":"current","audiences":["kevin","candid-team"],"topics":["psychology-aversion","behavioral-economics"],"reference_body":"**Claim:** Frederick, Loewenstein, and O'Donoghue (2002) synthesize three decades of empirical work on time discounting. Findings:\n\n- **Discount rates are not constant** — they *decline* with time horizon (the signature of hyperbolic discounting, Laibson 1997)\n- **Discount rates vary widely** across consumption types\n- **Gains are discounted more steeply than losses; small amounts more steeply than large**\n\nHyperbolic discounting produces dynamically inconsistent preferences and is the formal mechanism behind procrastination, present bias, and systematic underinvestment in long-payback projects.\n\n**Source:** Frederick, S., Loewenstein, G., & O'Donoghue, T. (2002). \"Time Discounting and Time Preference: A Critical Review.\" *Journal of Economic Literature* 40(2): 351–401. https://www.aeaweb.org/articles?id=10.1257%2F002205102320161311\n\n**Confidence:** Verified.\n\n**Caveat:** Wide variance in discount rates across populations and consumption types means population-level estimates do not transfer cleanly to specific buyer segments. Construction-industry-specific time-discounting estimates are a research gap.\n\n**For Candid:** The 12-month-payback marketing engagement is exactly the target zone for hyperbolic discounting to predict rejection. Pitches with shorter feedback loops (initial deliverables in week 2, measurable indicator at month 1, kill point at month 3) sit well inside the high-weight near-term zone of the discount function. The bounded-kill-criteria structure ([[rule-engineer-explicit-kill-criteria-into-engagements]]) is partially redeemable in discounting terms — it converts \"12-month commitment\" into \"3-month decision then re-up.\"","rationale_body":null,"metadata":null,"links":{"outgoing":[{"slug":"research-brief-risk-aversion-post-failure-may-2026","title":"Research brief: risk aversion, loss aversion, and post-failure decision patterns in GC and trades-business decision-makers (May 2026)","kind":"reference","scope":"business","link_type":"relates-to"}],"incoming":[]},"created_at":"2026-05-25T13:13:31.041Z","updated_at":"2026-05-25T13:13:31.041Z"}