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For example, if a person holds not just "Dr." but "Priv.-Doz. Dr." or "Prof. Dr." should we include the full title after "Dear ..."?
Thank you.
P.S.
July 20, 2014 UPDATE: as some repliers correctly guessed I faced the question when I was writing an email to a German person.
As your question is referring to a "Priv.-Doz. Dr." I guess you want to address a German person. Hence, I would like to add to the already existing answers. In general, I agree that when in doubt, simply be more formal and use the full title.
However, at least in Germany you usually just use the highest title. Strictly speaking, only "Dr." is a proper academic title in Germany (i.e. Professor or Privatdozent are job titles). However, Professor is also seens as a title if addressing someone, due to the outstanding position coming with the title.
So, if someone is a "Prof. Dr. Dr. X", you just refer to him or her as "Prof. X". Titles like "Priv.-Doz." are usually not used, as these people normally also hold a doctoral degree, so you would address them as "Dr. X". Basically it boils down to:
When in doubt, use the full title. Err on the side of formality, and let them correct you if they wish.
I would address a Privatdozent simply as "Dear Dr. ..."; when (s)he becomes a professor, I'll write "Dear Prof. ..." Even in German, I wouldn't write "Lieber Priv.-Doz. Dr. ..."
It is very, very country dependent, so if you are not familiar with the local language, you should err on the side of politeness.
That being said, I am generally using full title in the address and other pompous places, but "Dear Professor Smith, " or other short form when addressing in the text. This is a place where you can safely err toward giving higher titles, no one ever refused to be called a professor. I would use "Dear Dr. " with people I am sure that they are post-docs or people with no academic affiliation (lawyers, industrial people), and use "Professor" to anyone with habilitation, formal teaching assignment etc.
It is important indeed to address people correctly, more important that initials, one may pay much more attention to the correctness of the name and family name which that person has written in his web pages, letters and papers. Even, if you know some people who know him (e.g. colleague, students, etc.) simply ask them how it is better to call that person.
In my opinion, the best way to address a person and write his name in letters is to copy and paste the exact thing he has written in his web page.
If the person has included his initials in his web page such as "Dr.", "Priv.-Doz. Dr." or "Prof. Dr." then it seems that those initials are important for him and should be included; if there is no sign of those initials; then it is better just to use Dr. or Professor.
If you use something and he feels it should be corrected, then he will use the correct form of his name in his reply email. After that, use his preferred way to write his name.
