A Multigenerational Game Model to Analyze Sustainable Development

Alain Haurie ()

Annals of Operations Research, 2005, vol. 137, issue 1, 369-386

Abstract: This paper deals with a multigeneration game that provides a new rationale for representing time preference in very long term cost benefit analysis, as it happens typically in the economics of global climate change. One defines an intergenerational game where each generation has a random life duration and transfers the control of the economic system to the next generation at the end of its life. The payoff to a generation is a discounted sum of the expected consumption by the whole infinite sequence of generations, starting with the current one. The equilibrium is characterized by a dynamic programming equation; a unique solution is proved to exist; a numerical technique is proposed and implemented on a continuous time simplified version of the model DICE94. The results show the influence of this form of altruism on the asymptotic steady states of the economy subject to a global climate change effect. Copyright Springer Science + Business Media, Inc. 2005

Keywords: discounting; intergenerational equity; stochastic game; intergenerational equilibrium; turnpike solutions; cost-benefit analysis; climate change policies (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/s10479-005-2267-2

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