Now or Never: Environmental Protection under Hyperbolic Discounting

The author analyzes the optimal investment in environmental protection in a model of non-overlapping hyperbolically discounting agents. He shows that, in the long run and in the absence of a commitment device, society is stuck in a situation where all agents prefer further investments, yet no agent invests. This holds no matter whether agents are aware of the time inconsistency of their preferences. As a consequence, awareness of the time-inconsistency problem poses at best a short run remedy. Moreover, such an outcome may be Pareto inefficient and may explain the weak performance of long-run environmental policies.

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Year of publication:	2009
Authors:	Winkler, Ralph
Published in:	Economics: The Open-Access, Open-Assessment E-Journal. - Kiel : Kiel Institute for the World Economy (IfW), ISSN 1864-6042. - Vol. 3.2009, 2009-12, p. 1-22
Publisher:	Kiel : Kiel Institute for the World Economy (IfW)
Subject:	Environmental policy \| environmental protection \| hyperbolic discounting \| Markov perfect equilibria \| time-inconsistency

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Type of publication:	Article
Type of publication (narrower categories):	Article
Language:	English
Other identifiers:	10.5018/economics-ejournal.ja.2009-12 [DOI] 599039248 [GVK] hdl:10419/27532 [Handle] RePEc:zbw:ifweej:7598 [RePEc]
Classification:	D90 - Intertemporal Choice and Growth. General ; Q50 - Environmental Economics. General ; Q58 - Government Policy
Source:	EconStor

Persistent link: https://www.econbiz.de/10010298631