Interpersonal discounting

Many discounting choices affect both the decision maker and at least one other person. The interpersonal nature of these choices is not well explored because the current empirical literature primarily focuses on estimating individual discount rates. 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 traditional individual discount rates, particularly in situations when an individual may trade off his/her own future payment with the current payoff for others. We find support that the distinct interpersonal discount rate reflects a temporal form of other-regarding preferences.