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Farm-level investment analysis: what discount rate to use?

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  • Koppenberg, Maximilian
  • Spiegel, Alisa

Abstract

A discount rate is based on different aspects and differs across regions, economic sectors, investment projects, and decision makers. The choice of a discount rate requires a fundamental analysis and argumentation, in order to avoid an under- or overestimation of investment projects. Having conducted a farm-level experiment in North-Rhine Westphalia (NRW, Germany), we estimated the current discount rates in German agriculture, as well as quantify the effects of different factors on discount rate.

Suggested Citation

  • Koppenberg, Maximilian & Spiegel, Alisa, 2017. "Farm-level investment analysis: what discount rate to use?," 57th Annual Conference, Weihenstephan, Germany, September 13-15, 2017 262167, German Association of Agricultural Economists (GEWISOLA).
    • Handle: RePEc:ags:gewi17:262167
    DOI: 10.22004/ag.econ.262167
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    References listed on IDEAS

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    1. Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment," American Economic Review, American Economic Association, vol. 92(5), pages 1606-1617, December.
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    3. Johannes Sauer & Uwe Latacz-Lohmann, 2015. "Investment, technical change and efficiency: empirical evidence from German dairy production," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 42(1), pages 151-175.
    4. Eyal Lahav & Mosi Rosenboim & Tal Shavit, 2015. "Financial literacy's effect on elicited subjective discount rate," Economics Bulletin, AccessEcon, vol. 35(2), pages 1360-1368.
    5. Martin Odening & Oliver Mußhoff & Alfons Balmann, 2005. "Investment decisions in hog finishing: an application of the real options approach," Agricultural Economics, International Association of Agricultural Economists, vol. 32(1), pages 47-60, January.
    6. Eric Duquette & Nathaniel Higgins & John Horowitz, 2012. "Farmer Discount Rates: Experimental Evidence," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(2), pages 451-456.
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