Time Preference


The concept of time preference complements the concept of value preference. While value preference determines how one ranks different goods relative to each other at a specific moment in time, time preference determines how much higher someone places the immediate consumption of a good versus its future consumption. All other things being equal, one always prefers the immediate consumption of a good to its future consumption.

For example: All other things being equal, one would prefer owning one home today to owning one home in 5 years. However, one might be willing to trade one home today against, say, 2 homes in 5 years. (Credit Transaction)

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