Discounting, Uncertainty, and Revealed Time Preference
AbstractRecent studies suggest that direct preferences regarding investment gains and losses may significantly affect people’s behavior in financial markets. The present paper shows that this hypothesis has striking implications for the choice of discount rates in cost-benefit analysis. The paper explores a model in which the future benefits provided by a generic public good—environmental quality—should be discounted at a rate that is close to the market rate of return for risk-free financial assets. This holds true even when the public good has risk characteristics equivalent to those of risky forms of wealth such as corporate stocks.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by University of Wisconsin Press in its journal Land Economics.
Volume (Year): 85 (2009)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://le.uwpress.org/
Find related papers by JEL classification:
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
- Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Kovacs, Kent F. & Polasky, Stephen & Keeler, Bonnie & Pennington, Derric & Nelson, Erik & Plantinga, Andrew J. & Taff, Steven J., 2012. "Evaluating the Return in Ecosystem Services from Investment in Public Land Acquisitions," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124660, Agricultural and Applied Economics Association.
- Johansson-Stenman, Olof & Sterner, Thomas, 2011.
"Discounting and Relative Consumption,"
dp-11-38, Resources For the Future.
- Zhou, Mo & Buongiorno, Joseph, 2011. "Effects of stochastic interest rates in decision making under risk: A Markov decision process model for forest management," Forest Policy and Economics, Elsevier, vol. 13(5), pages 402-410, June.
- Kovacs, Kent F. & Haight, Robert G. & McCullough, Deborah G. & Mercader, Rodrigo J. & Siegert, Nathan W. & Liebhold, Andrew M., 2010. "Cost of potential emerald ash borer damage in U.S. communities, 2009-2019," Ecological Economics, Elsevier, vol. 69(3), pages 569-578, January.
- Mehdi Farsi, 2008.
"Risk-Aversion and Willingness to Pay for Energy Efficient Systems in Rental Apartments,"
CEPE Working paper series
08-55, CEPE Center for Energy Policy and Economics, ETH Zurich.
- Farsi, Mehdi, 2010. "Risk aversion and willingness to pay for energy efficient systems in rental apartments," Energy Policy, Elsevier, vol. 38(6), pages 3078-3088, June.
- Gerst, Michael D. & Howarth, Richard B. & Borsuk, Mark E., 2010. "Accounting for the risk of extreme outcomes in an integrated assessment of climate change," Energy Policy, Elsevier, vol. 38(8), pages 4540-4548, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.