Interpersonal Discounting

35 Pages Posted: 20 Aug 2018

See all articles by Rong Rong

Rong Rong

University of Massachusetts Amherst

Therese C. Grijalva

Weber State University (WSU) - Department of Economics

Jayson Lusk

Purdue University

W. Douglass Shaw

Texas A&M University

Date Written: Nov 8, 2017

Abstract

Many discounting choices affect both the decision maker as well as others. The interpersonal nature of these choices is not well explored because the current empirical literature primarily focuses on estimating individual discount rates (IDRs). We design a laboratory experiment to elicit interpersonal discount rates where individuals consider present versus future consumption tradeoffs for cases that involve both the self and others. By allowing for possible presence of others’ welfare in one’s utility function, our estimation results show that interpersonal discount rates are significantly different from the traditional IDR, particularly in situations when individuals may tradeoff his/her future payment with the current payoff for others. We find support that the distinct interpersonal discount rates reflect a temporal form of other-regarding preference.

Keywords: Social Discount Rate, Time Preference, Altruism, Laboratory Experiment

JEL Classification: D90, C9

Suggested Citation

Rong, Rong and Grijalva, Therese C. and Lusk, Jayson and Shaw, W. Douglass, Interpersonal Discounting (Nov 8, 2017). Available at SSRN: https://ssrn.com/abstract=3228452 or http://dx.doi.org/10.2139/ssrn.3228452

Rong Rong (Contact Author)

University of Massachusetts Amherst ( email )

United States
7035319637 (Phone)

Therese C. Grijalva

Weber State University (WSU) - Department of Economics ( email )

Ogden, UT 84408-3807
United States
801-626-7567 (Phone)
801-626-7423 (Fax)

HOME PAGE: http://faculty.weber.edu/tgrijalva

Jayson Lusk

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

W. Douglass Shaw

Texas A&M University ( email )

Langford Building A
798 Ross St.
College Station, TX 77843-3137
United States

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