A Resource Extraction Model with Technology Adoption under Time Inconsistent Preferences

Carles Mañó-Cabello, Jesús Marín-Solano and Jorge Navas
Additional contact information
Carles Mañó-Cabello: Departament Matemàtica Econòmica, Financera i Actuarial and BEAT, Universitat de Barcelona, 08034 Barcelona, Spain
Jesús Marín-Solano: Departament Matemàtica Econòmica, Financera i Actuarial and BEAT, Universitat de Barcelona, 08034 Barcelona, Spain
Jorge Navas: Departament Matemàtica Econòmica, Financera i Actuarial and BEAT, Universitat de Barcelona, 08034 Barcelona, Spain

Mathematics, 2021, vol. 9, issue 18, 1-24

Abstract: A two-stage non-standard optimal control problem with time inconsistent preferences is studied. In an infinite horizon setting, a time consistent (sophisticated) decision maker chooses the time of switching between two consecutive regimes. The second regime corresponds to the implementation of a new technology, and a cost must be paid at the switching time. Although the problem is formulated for a general discount function, special attention is devoted to models with nonconstant discounting and heterogeneous discounting. The problem is solved by transforming it into a problem in a finite horizon and free terminal time. The corresponding dynamic programming equations are presented, and conditions for the derivation of the switching time by decision makers with different degrees of sophistication are studied. A resource extraction model with technology adoption is solved in detail. Effects of the adoption of different discount functions are illustrated numerically.

Keywords: resource management; regime shift; switching time; non-constant discounting; heterogeneous discounting (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7390/9/18/2205/pdf (application/pdf)
https://www.mdpi.com/2227-7390/9/18/2205/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:9:y:2021:i:18:p:2205-:d:631711

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().