Dynamic Resource Management: Intertemporal Substitution and Risk Aversion
We consider resource management with recursive preferences. These generalize expected utility while eliminating some well-known difficulties. Monotonicity and convergence properties of optimal decision rules are established using lattice programming methods. Empirical applications are rangeland and groundwater management. Decreasing the intertemporal elasticity of substitution implies greater (lower) resource usage with limited (abundant) stocks. This moderates stock evolution and stabilizes consumption. Increasing risk aversion implies the same or reduced usage over the state space. Intertemporal substitution has a substantial effect on the optimal decision rule and a moderate effect on the limiting distribution, while risk aversion has a very small effect. Copyright 1996, Oxford University Press.
Volume (Year): 78 (1996)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202|
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:oup:ajagec:v:78:y:1996:i:4:p:1004-1014. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.