Equilibrium Resource Management with Altruistic Overlapping Generations
32 Pages Posted: 26 Jul 2013
Date Written: July 9, 2013
We imbed a classic fishery model, where the optimal policy follows a Most Rapid Approach Path to a steady state, into an overlapping generations setting. The current generation discounts future generations' utility flows at a rate possibly different from the pure rate of time preference used to discount their own utility flows. The resulting model has non-constant discount rates, leading to time inconsistency. The unique Markov Perfect equilibrium to this model has a striking feature: provided that the current generation has some concern for the not-yet born, the equilibrium policy does not depend on the degree of that concern.
Keywords: overlapping generations, time inconsistency, hyperbolic discounting, Markov perfect, renewable resources
JEL Classification: C73, D64, D90, Q01, Q22, C61
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