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The determinants of discounting in intergenerational decision-making

Author

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  • Breuer, Wolfgang
  • Müller, Torbjörn
  • Sachsenhausen, Eric

Abstract

We investigate discounting behavior in situations where both intertemporal and social discounting occur simultaneously. Situations of intergenerational conflicts are characterized by both time delay and social distance and can be interpreted either as a combination of current donations with delegated investments for others or of current investments for one's own and future donations to others. Due to well-known self-control problems with respect to investments for one's own, the second interpretation implies overall higher discounting in intergenerational decision problems than the first one. We show experimentally that discounting in intergenerational decision-making indeed lies between the implications of these two interpretations so that self-control problems seem to be at work here as well. This problem can be mitigated by adequate framing supporting the first view of intergenerational decision problems described above. Our findings are relevant for policy makers and researchers alike.

Suggested Citation

  • Breuer, Wolfgang & Müller, Torbjörn & Sachsenhausen, Eric, 2022. "The determinants of discounting in intergenerational decision-making," European Economic Review, Elsevier, vol. 148(C).
    • Handle: RePEc:eee:eecrev:v:148:y:2022:i:c:s001429212200126x
    DOI: 10.1016/j.euroecorev.2022.104215
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    References listed on IDEAS

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    More about this item

    Keywords

    Behavioral finance; Intergenerational decision-making; Social discounting; Time discounting;
    All these keywords.

    JEL classification:

    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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