A multigenerational game model to analyze sustainable development

A multigenerational game model to analyze sustainable development

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Article ID: iaor2006309
Country: Netherlands
Volume: 137
Issue: 1
Start Page Number: 369
End Page Number: 386
Publication Date: Jul 2005
Journal: Annals of Operations Research
Authors:
Keywords: cost benefit analysis, programming: dynamic
Abstract:

This paper deals with a multigeneration game that provides a new rationale for representing time preference in very long term cost benefit analysis, as it happens typically in the economics of global climate change. One defines an intergenerational game where each generation has a random life duration and transfers the control of the economic system to the next generation at the end of its life. The payoff to a generation is a discounted sum of the expected consumption by the whole infinite sequence of generations, starting with the current one. The equilibrium is characterized by a dynamic programming equation; a unique solution is proved to exist; a numerical technique is proposed and implemented on a continuous time simplified version of the model DICE94. The results show the influence of this form of altruism on the asymptotic steady states of the economy subject to a global climate change effect.

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