Other-Regarding Preferences and Social Norms in the Intergenerational Transfer of Renewable Resources when the Agent has Present-Biased Preferences

CERE Working Paper, 2021:6

33 Pages Posted: 26 May 2021

See all articles by Marco Persichina

Marco Persichina

Swedish University of Agricultural Sciences (SLU) - Department of Forest Economics; University of Umea - Department of Economics; Swedish University of Agricultural Sciences (SLU) - Center for Environmental and Resource Economics (CERE)

Date Written: May 20, 2021

Abstract

The paper analyzes the effects of present-biased preferences on the transfer of resources to future generations in the framework of renewable resource harvesting. The paper assumes that the current generation has other-regarding motivations for future generations, expressed through the adherence to spontaneous other-regarding preferences or social norms. Because the short-sighted behavior imposed by the “dictatorship of the present” can cause a reduction in the well-being of future generations, despite the existence of social preferences, the model presented in this study demonstrates that if the social preferences are also expressed through social norms that prescribe no reevaluation of the harvesting decisions, a mitigation of the effect of present bias on intergenerational equity can occur. In this paper, the model presented shows the properties that a social norm should have to avoid the intergenerational inequality that can be derived from present-biased preferences in intergenerational renewable resource management. Additionally, the model defines the necessary and sufficient conditions such that the implementation of the social norm can neutralize the effect of present-biased preferences, guaranteeing the optimal harvesting path defined at the beginning.

Keywords: present bias, naïve agent, intergenerational resource management, renewable resources, harvesting, other-regarding preferences, social norms

JEL Classification: D01, D03, D15, D90, D91

Suggested Citation

Persichina, Marco, Other-Regarding Preferences and Social Norms in the Intergenerational Transfer of Renewable Resources when the Agent has Present-Biased Preferences (May 20, 2021). CERE Working Paper, 2021:6, Available at SSRN: https://ssrn.com/abstract=3850667 or http://dx.doi.org/10.2139/ssrn.3850667

Marco Persichina (Contact Author)

Swedish University of Agricultural Sciences (SLU) - Department of Forest Economics ( email )

S-901 83 Umea
Sweden

University of Umea - Department of Economics ( email )

Umeå University
Umea, SE - 90187
Sweden

Swedish University of Agricultural Sciences (SLU) - Center for Environmental and Resource Economics (CERE) ( email )

Almas Allé 10
Umeå, 750 07
Sweden

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