The Dilemmas of Public Vs. Private Goods Discounting for Long-Term Investment Appraisal: The Puzzle of Citizen and Consumer Approaches to Valuation

Foltyn-Zarychta Monika ()
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Foltyn-Zarychta Monika: University of Economics in Katowice, College of Finance, Department of Investment, 1 Maja 50, 40-287Katowice, Poland

Folia Oeconomica Stetinensia, 2020, vol. 20, issue 2, 114-133

Abstract: Research background: An investment appraisal applies a single discount rate across all effects. However, this may be insufficient for heterogenous environmental impacts, mixing private and public goods as well as use and non-use values, where individuals may have multiple intertemporal preferences due to their duality to act as consumer or citizen.Purpose: The paper aims at identifying the scope of discrepancies in the level of discount rate for public and private as well as use-and non-use investment gains.Research methodology: The contingent valuation method is used to elicit stated discount rates for 2 hypothetical investments: environmental or financial gains to distinguish between public and private domain accompanied by two time-frames: short (use values) and long (non-use values).Results: The discount rate for the environment is lower than for money. It is also lower for the long-term horizon in comparison with the short-term perspective. The discrepancies are observed also for explanatory variables in respect to a socio-economic profile and attitude characteristics.Novelty: The paper adds to the discussion on valuation discrepancies between self-interested consumers and socially oriented citizens. The scarcity of previous research examining discount rates for public/private goods as well as the short/long-time horizon make the results relevant for public policy dealing with climate change and environmental protection, providing an insight into individual intertemporal preferences.

Keywords: investment appraisal; valuation; discounting; citizen vs. consumer distinction (search for similar items in EconPapers)
JEL-codes: D15 D61 H43 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:foeste:v:20:y:2020:i:2:p:114-133:n:18

DOI: 10.2478/foli-2020-0039

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