Hyperbolic discounting

Written by Guido Jansen in
November 2010

Theory:

We discount the value of the later reward, by a factor that increases with the length of the delay. In other words: We prefer a small reward now over a large reward later on.

Application:

Rewards later, are worth less then rewards right now. People rather have €50 right now then €60 in a month. But that is inconsistent if you change the timeframe: people prefer having €60 in 13 months, rather then €50 in twelve months, although the wait for the extra €10 is still one month. When you give discounts in your shop you need to take notice of this, or you can even play with it. If you have a points system in your shop you can offer small discounts right now and big discounts in the future, but people are most likely to go for the small discount, unless the reward for waiting is REALLY big. Dan Gilbert explains this phenomenon in his TED Talk 'Exploring the frontiers of happiness' (video). He starts talking about Hyperbolic discounting at 18:13, but I recommend you see the whole video as it is a great presentation. Further reading: Hyperbolic discounting on Wikipedia.

Recent posts
Optimization hierarchy of evidence
Optimization hierarchy of evidence

A hierarchy of evidence (or levels of evidence) is a heuristic used to rank the relative strength of results obtained from scientific research. I've created a version of this chart/pyramid applied to CRO which you can see below. It contains the options we have as optimizers and tools and methods we often use to gather data.

[EN] Datascience can do what?
[EN] Datascience can do what?

This is a bonus episode with Emily Robinson (Senior Data Scientist at Warby Parker) en Lukas Vermeer (Director of Experimentation at Booking.com). In her earlier session that day, Emily said that real progress starts when you put your work online for others to see and comment on which in this case was about Github. Someone from the audience wondered how that works out in larger companies where a manager or even a legal department might not be overly joyous about that to say the least so I asked Emily about her thoughts on that. Recorded live with audience pre-covid-19 at the Conversion Hotel conference in november 2019 on the island of Texel in The Netherlands. (oorspronkelijk gepubliceerd op https://www.cro.cafe/)