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Now or Never: Environmental Protection under Hyperbolic Discounting

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Author Info
Winkler, Ralph

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Abstract

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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Publisher Info
Article provided by Kiel Institute for the World Economy in its journal Economics: The Open-Access, Open-Assessment E-Journal.

Volume (Year): 3 (2009)
Issue (Month): 12 ()
Pages: 1-22
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Handle: RePEc:zbw:ifweej:7598

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Related research
Keywords: Environmental policy; environmental protection; hyperbolic discounting; Markov perfect equilibria; time-inconsistency;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Yohe, Gary W. & Tol, Richard S. J. & Anthoff, David, 2009. "Discounting for Climate Change," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 3(24), pages 1-22. [Downloadable!]
    Other versions:
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