Journal of Forest Economics > Vol 18 > Issue 3

Optimal conservation policy under imperfect intergenerational altruism

Luca Di Corato, , luca.di.corato@slu.se
 
Suggested Citation
Luca Di Corato (2012), "Optimal conservation policy under imperfect intergenerational altruism", Journal of Forest Economics: Vol. 18: No. 3, pp 194-206. http://dx.doi.org/10.1016/j.jfe.2012.02.002

Published: 0/8/2012
© 0 2012 Luca Di Corato
 
Subjects
 
Keywords
JEL Codes:D81C70Q23Q58
Real optionsIntergenerational imperfect altruismHyperbolic discountingTiming game
 

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In this article:
Introduction
The basic set-up
Optimal conversion policy under perfect intergenerational altruism
Optimal conversion policy under imperfect intergenerational altruism
Conclusions

Abstract

In this paper we study the optimal conversion policy set by a society composed of a sequence of non-overlapping imperfectly altruistic generations. We show that society can be equivalently viewed as a sequence of hyperbolic discounting agents. Under uncertainty about future pay-offs we determine, as solution to an intergenerational non-cooperative dynamic game, the optimal timing of irreversible conversion. We show that under both naive and sophisticated beliefs about future time-inconsistency, the option value attached to the conversion decision is eroded and earlier conversion occurs. This determines a drastic bias toward the current generation gratification, which affects the intergenerational allocation of benefits and costs from deforestation.

DOI:10.1016/j.jfe.2012.02.002