Optimal conservation policy under imperfect intergenerational altruism

Abstract

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.

Keywords

Real options; Intergenerational imperfect altruism; Hyperbolic discounting; Timing game.

Published in

Journal of Forest Economics
2012, volume: 18, number: 3, pages: 194-206
Publisher: Elsevier

SLU Authors

• Di Corato, Luca

  • Department of Economics, Swedish University of Agricultural Sciences
    

Global goals (SDG)

SDG15 Life on land

UKÄ Subject classification

Economics

Publication identifier

• DOI: https://doi.org/10.1016/j.jfe.2012.02.002

Permanent link to this page (URI)

https://res.slu.se/id/publ/39511