Now or Never: Environmental Protection under Hyperbolic Discounting

Ralph Winkler ()

Economics - The Open-Access, Open-Assessment E-Journal, 2009, vol. 3, issue 12, pages 1-22

Abstract: The author analyzes the optimal investment in environmental protection in a model of non-overlapping hyperbolically discounting agents. He shows that, in the long run and in the absence of a commitment device, society is stuck in a situation where all agents prefer further investments, yet no agent invests. This holds no matter whether agents are aware of the time inconsistency of their preferences. As a consequence, awareness of the time-inconsistency problem poses at best a short run remedy. Moreover, such an outcome may be Pareto inefficient and may explain the weak performance of long-run environmental policies.

Keywords: Environmental policy; environmental protection; hyperbolic discounting; Markov perfect equilibria; time-inconsistency (search for similar items in EconPapers)
Date: 2009
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Related works:
Working Paper: Now or Never: Environmental Protection under Hyperbolic Discounting (2006)
Working Paper: Now or Never: Environmental Protection under Hyperbolic Discounting (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:zbw:ifweej:7598

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