Optimal Conservation Policy Under Imperfect Intergenerational Altruism

17 Pages Posted: 25 Jan 2012

See all articles by Luca Di Corato

Luca Di Corato

Ca Foscari University of Venice - Dipartimento di Economia

Date Written: January 23, 2012

Abstract

In this paper we study the optimal forest conservation policy by a hyperbolically discounting society. Society comprises a series of non-overlapping imperfectly altruistic generations each represented by its own government. Under uncertainty about future pay-offs we determine, as solution of an intergenerational dynamic game, the optimal timing of irreversible harvest. Earlier harvest occurs and the option value attached to the forest clearing decision is eroded under both the assumptions of naïve and sophisticated belief about future time-preferences. This results in a bias toward the current generation gratification which affects the intergenerational allocation of benefits and costs from harvesting and conserving a natural forest.

Keywords: Imperfect Altruism, Real Options, Hyperbolic Discounting, Time Inconsistency, Natural Resources Management

JEL Classification: D81, C70, Q23, Q58

Suggested Citation

Di Corato, Luca, Optimal Conservation Policy Under Imperfect Intergenerational Altruism (January 23, 2012). FEEM Working Paper No. 89.2011, Available at SSRN: https://ssrn.com/abstract=1990143 or http://dx.doi.org/10.2139/ssrn.1990143

Luca Di Corato (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

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