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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 S.
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 S., 2006. "Numerical Analysis of Non-Constant Discounting with an Application to Renewable Resource Management," CUDARE Working Papers 7199, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:7199
    DOI: 10.22004/ag.econ.7199
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