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Computing Equilibria In Stochastic Games Of Intergenerational Equity

Author

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  • ALAIN B. HAURIE

    (Logilab-HEC, Université de Genève, 40 Blvd. du Pont-d'Arve, 1211 Genève 4, Switzerland)

  • FRANCESCO MORESINO

    (Logilab-HEC, Université de Genève, 40 Blvd. du Pont-d'Arve, 1211 Genève 4, Switzerland)

Abstract

In this paper we further explore the properties and computational methods of intergenerational equilibrium solutions for a class of multi-generation stochastic games that are inspired by the intergenerational equity issues typically found in cost-benefit analysis for climate change policies. We first extend previous results by showing that discounting over time and over generations yields to an intergenerational equilibrium which is equivalent to the use of a lower discount rate. We then propose a model that encompasses the different formulations proposed before to represent intergenerational equilibria in the presence of selfishness. We propose a numerical method to compute these equilibria and we test it on an adaptation of the DICE94 model proposed by Nordhaus to do cost-benefit analysis of climate policies.

Suggested Citation

  • Alain B. Haurie & Francesco Moresino, 2006. "Computing Equilibria In Stochastic Games Of Intergenerational Equity," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 8(02), pages 273-293.
    • Handle: RePEc:wsi:igtrxx:v:08:y:2006:i:02:n:s0219198906000898
    DOI: 10.1142/S0219198906000898
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    References listed on IDEAS

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    1. de la Croix,David & Michel,Philippe, 2002. "A Theory of Economic Growth," Cambridge Books, Cambridge University Press, number 9780521001151, June.
    2. -, 2000. "The equity gap: a second assessment," Libros y Documentos Institucionales, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 2682 edited by Eclac, February.
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    More about this item

    Keywords

    Stochastic games; social choice; environmental economics; discounting; intergenerational equity; Subject Classification: 91A15; Subject Classification: 91B14; Subject Classification: 91B76;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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