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Numerical Analysis of Non-Constant Discounting with an Application to Renewable Resource Management

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  • Fujii, Tomoki
  • Karp, Larry

Abstract

The possibility of non-constant discounting is important in environmental and resource management problems where current decisions affect welfare in the far-distant future, as with climate change. The difficulty of analyzing models with non-constant discounting limits their application. We describe and provide software to implement an algorithm to numerically obtain a Markov Perfect Equilibrium for an optimal control problem with non-constant discounting. The software is available online. We illustrate the approach by studying welfare and observational equivalence for a particular renewable resource management problem.

Suggested Citation

  • Fujii, Tomoki & Karp, Larry, 2006. "Numerical Analysis of Non-Constant Discounting with an Application to Renewable Resource Management," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt74q473v8, Department of Agricultural & Resource Economics, UC Berkeley.
  • Handle: RePEc:cdl:agrebk:qt74q473v8
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    References listed on IDEAS

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    Cited by:

    1. Lizzeri, Alessandro & Yariv, Leeat, 2015. "Collective Self Control," CEPR Discussion Papers 10458, C.E.P.R. Discussion Papers.

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