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Time-consistent renewable resource management with present bias and regime shifts
Umeå University, Faculty of Social Sciences, Centre for Environmental and Resource Economics (CERE). Department of Forest Economics, Swedish University of Agricultural Sciences, Umeå, Sweden.ORCID iD: 0000-0002-9494-6467
2023 (English)In: Journal of Economic Behavior and Organization, ISSN 0167-2681, E-ISSN 1879-1751, Vol. 207, p. 479-495Article in journal (Refereed) Published
Abstract [en]

We investigate the extraction plan of present-biased decision makers managing a renew-able resource stock whose growth is uncertain and which could undergo a rapid and sig-nificant change when stock falls below a threshold. We show that the Markov-Nash equi-librium extraction policy is unique, time consistent, and increasing in resource stock. An increase in the threshold leads to increased resource extraction, rather than the precau-tionary reduction in extraction often observed with exponential discounting. An increase in the degree of present bias also leads to an increase in resource extraction. Our analy-sis suggests that accounting for and appropriately dealing with resource managers' present bias may be important to understand resource use sustainability.

Place, publisher, year, edition, pages
Elsevier, 2023. Vol. 207, p. 479-495
Keywords [en]
Renewable resources, Regime shifts, Hyperbolic discounting, Present bias, Uncertainty, Markov equilibrium
National Category
Economics
Identifiers
URN: urn:nbn:se:umu:diva-217968DOI: 10.1016/j.jebo.2023.01.016ISI: 000967202600001Scopus ID: 2-s2.0-85147680698OAI: oai:DiVA.org:umu-217968DiVA, id: diva2:1819647
Available from: 2023-12-14 Created: 2023-12-14 Last updated: 2023-12-14Bibliographically approved

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B. Krishnamurthy, Chandra Kiran

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Arvaniti, MariaB. Krishnamurthy, Chandra KiranCrepin, Anne-Sophie
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CiteExportLink to record
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