Time Consistent Pareto Solutions in Common Access Resource Games with Asymmetric Players
In the analysis of equilibrium policies in a di erential game, if agents have different time preference rates, the cooperative (Pareto optimum) solution obtained by applying the Pontryagin's Maximum Principle becomes time inconsistent. In this work we derive a set of dynamic programming equations (in discrete and continuous time) whose solutions are time consistent equilibrium rules for N-player cooperative di erential games in which agents di er in their instantaneous utility functions and also in their discount rates of time preference. The results are applied to the study of a cake-eating problem describing the management of a common property exhaustible natural resource. The extension of the results to a simple common property renewable natural resource model in in nite horizon is also discussed.
|Date of creation:||2011|
|Date of revision:|
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- Jesus Marin Solano & Jorge Navas Rodenes, 2007.
"Non-constant discounting in finite horizon: The free terminal time case,"
Working Papers in Economics
183, Universitat de Barcelona. Espai de Recerca en Economia.
- Marín-Solano, Jesús & Navas, Jorge, 2009. "Non-constant discounting in finite horizon: The free terminal time case," Journal of Economic Dynamics and Control, Elsevier, vol. 33(3), pages 666-675, March.
- Aart de Zeeuw, 2005.
"Dynamic Effects on the Stability of International Environmental Agreements,"
2005.41, Fondazione Eni Enrico Mattei.
- de Zeeuw, Aart, 2008. "Dynamic effects on the stability of international environmental agreements," Journal of Environmental Economics and Management, Elsevier, vol. 55(2), pages 163-174, March.
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