Time Consistent Pareto Solutions in Common Access Resource Games with Asymmetric Players

Albert de-Paz, Jesus Marin-Solano and Jorge Navas
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Jorge Navas: Universitat de Barcelona

No 253, Working Papers in Economics from Universitat de Barcelona. Espai de Recerca en Economia

Abstract: In the analysis of equilibrium policies in a di erential game, if agents have different time preference rates, the cooperative (Pareto optimum) solution obtained by applying the Pontryagin's Maximum Principle becomes time inconsistent. In this work we derive a set of dynamic programming equations (in discrete and continuous time) whose solutions are time consistent equilibrium rules for N-player cooperative di erential games in which agents di er in their instantaneous utility functions and also in their discount rates of time preference. The results are applied to the study of a cake-eating problem describing the management of a common property exhaustible natural resource. The extension of the results to a simple common property renewable natural resource model in in nite horizon is also discussed.

JEL-codes: C61 C71 C73 Q20 Q30 (search for similar items in EconPapers)
Pages: 0 pages
Date: 2011
New Economics Papers: this item is included in nep-env and nep-gth
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Citations: View citations in EconPapers (1)

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