COMPUTING EQUILIBRIA IN STOCHASTIC GAMES OF INTERGENERATIONAL EQUITY

Alain B. Haurie () and Francesco Moresino ()
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Alain B. Haurie: Logilab-HEC, Université de Genève, 40 Blvd. du Pont-d'Arve, 1211 Genève 4, Switzerland
Francesco Moresino: Logilab-HEC, Université de Genève, 40 Blvd. du Pont-d'Arve, 1211 Genève 4, Switzerland

International Game Theory Review (IGTR), 2006, vol. 08, issue 02, 273-293

Abstract: In this paper we further explore the properties and computational methods of intergenerational equilibrium solutions for a class of multi-generation stochastic games that are inspired by the intergenerational equity issues typically found in cost-benefit analysis for climate change policies. We first extend previous results by showing that discounting over time and over generations yields to an intergenerational equilibrium which is equivalent to the use of a lower discount rate. We then propose a model that encompasses the different formulations proposed before to represent intergenerational equilibria in the presence of selfishness. We propose a numerical method to compute these equilibria and we test it on an adaptation of the DICE94 model proposed by Nordhaus to do cost-benefit analysis of climate policies.

Keywords: Stochastic games; social choice; environmental economics; discounting; intergenerational equity; Subject Classification: 91A15; Subject Classification: 91B14; Subject Classification: 91B76 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2006
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DOI: 10.1142/S0219198906000898

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