I don't know enough about the LCD readout to say if the problem could be there. However, I believe that the sensor resistance goes down as the temperature goes up (a negative resistance/temperature coefficient). Since the readout does vary but is always 18 degrees too low, it may be possible that there is a poor connection between the sensor and the readout in the dash giving a higher resistance and thus an apparent lower higher temperature.

I'd suggest opening and cleaning first the connector in the engine compartment where the sensor cable connects to the wiring which goes to the dash instruments. If that doesn't fix the problem, pull the instrument cluster and remove and clean the connector to the temperature readout. This won't cost anything but time.

The readout in my '86 300E went bad and I replaced it with one off of Ebay which worked fine. I disassembled the old readout and found places where corrosion might affect sectors in the LCD pattern but couldn't learn much about the electronics.

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1986 300E
1993 Volvo 940 Wagon
1984 Volvo 240 (daughter's)
1976 Dodge 1/2T pickup, gas hog