Skip to main content
eScholarship
Open Access Publications from the University of California

Global warming and hyperbolic discounting

Abstract

The use of a constant discount rate to study long-lived environmental problems such as global warming has two disadvantages: the prescribed policy is sensitive to the discount rate, and with moderate discount rates, large future damages have almost no effect on current decisions. Time-consistent quasi-hyperbolic discounting alleviates both of these modeling problems, and is a plausible description of how people think about the future. We analyze the time-consistent Markov Perfect equilibrium in a general model with a stock pollutant. The solution to the linear-quadratic specialization illustrates the role of hyperbolic discounting in a model of global warming. (C) 2004 Elsevier B.V. All rights reserved.

Many UC-authored scholarly publications are freely available on this site because of the UC's open access policies. Let us know how this access is important for you.

Main Content
Current View