Numerical Analysis of Non-constant Discounting withan Application to Renewable Resource ManagementTomoki Fujii∗Larry Karp†May 31, 2006AbstractThe possibility of non-constant discounting is important in environmental and resourcemanagement problems where current decisions affect welfare in the far-distant future, aswith climate change.The difficulty of analyzing models with non-constant discountinglimits their application.We describe and provide software to implement an algorithmto numerically obtain a Markov Perfect Equilibrium for an optimal control problem withnon-constant discounting. The software is available online. We illustrate the approach bystudying welfare and observational equivalence for a particular renewable resource man-agement problem.Keywords: Non-constant discounting, numerical methods, non-renewable resources,observational equivalence.JEL classification numbers: C63, Q20∗School of Economics and Social Sciences, Singapore Management University, 90 Stamford Road, 178903Singapore email:[email protected]†Department of Agricultural and Resource Economics, 207 Giannini Hall, University of California, BerkeleyCA 94720 email:[email protected]
has intentionally blurred sections.
Sign up to view the full version.