Numerical Analysis of Non-Constant Discounting with an Application to Renewable Resource Management

Tomoki Fujii () and Larry S. Karp

No 1019, Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series from Department of Agricultural & Resource Economics, UC Berkeley

Abstract: The possibility of non-constant discounting is important in environmental and resource management problems where current decisions affect welfare in the far-distant future, as with climate change. The difficulty of analyzing models with non-constant discounting limits their application. We describe and provide software to implement an algorithm to numerically obtain a Markov Perfect Equilibrium for an optimal control problem with non-constant discounting. The software is available online. We illustrate the approach by studying welfare and observational equivalence for a particular renewable resource management problem.

Keywords: Non-constant discounting; numerical methods; non-renewable resources; observational equivalence. (search for similar items in EconPapers)
Date: 2006-05-31
Note: oai:cdlib1:are_ucb-1116
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