Di Corato, Luca
- Department of Economics, Swedish University of Agricultural Sciences
Research article2012Peer reviewedOpen access
Di Corato L
In this paper we study the optimal conversion policy set by a society composed of a sequence of non-overlapping imperfectly altruistic generations. We show that society can be equivalently viewed as a sequence of hyperbolic discounting agents. Under uncertainty about future pay-offs we determine, as solution to an intergenerational non-cooperative dynamic game, the optimal timing of irreversible conversion. We show that under both naive and sophisticated beliefs about future time-inconsistency, the option value attached to the conversion decision is eroded and earlier conversion occurs. This determines a drastic bias toward the current generation gratification, which affects the intergenerational allocation of benefits and costs from deforestation.
Real options; Intergenerational imperfect altruism; Hyperbolic discounting; Timing game.
Journal of Forest Economics
2012, volume: 18, number: 3, pages: 194-206
Publisher: Elsevier
Economics
https://res.slu.se/id/publ/39511