O'Donoghue and Rabin (2000)

O'Donoghue and Rabin (2000) is a seminal study in the field of behavioral economics, in which the authors proposed the Present-Bias Hypothesis. The hypothesis suggests that people are more likely to invest in the present rather than future because of the psychological urge to gratify present desires instead of the future. The authors argue that people tend to “discount” future values, leading to an increased willingness to pursue pleasure today and disappointments at a later time. The authors also suggest that such a phenomenon can be seen in a variety of economic situations, such as deciding to buy an expensive item on credit, or claiming a lottery ticket with a larger, but more delayed payout. The concept proposed in this study has been widely discussed in the literature, and is seen as an important part of the emerging field of behavioral economics.