Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/222584 
Year of Publication: 
2019
Series/Report no.: 
Economics Working Paper Series No. 19/329
Publisher: 
ETH Zurich, CER-ETH - Center of Economic Research, Zurich
Abstract: 
We investigate how a resource user who is present-biased manages a renewable resource stock with variable growth that could undergo a reversible regime shift (an abrupt, persistent change in structure and function of the ecosystem supplying the resource). In a discrete-time quasihyperbolic discounting framework with no commitment device, and using only generic utility functions and stock transition with regime shifts, we show that there is a unique, time-consistent stationary Markov-Nash equilibrium extraction policy. Further, we find that the optimal extraction policy is increasing in the resource stock and in the degree of present bias. Overall, our results suggest that for characteristics of ecosystems commonly considered in the literature, presentbiased resource users will increase extraction when faced with regime shifts.
Subjects: 
Renewable resources
Regime shifts
Hyperbolic Discounting
Present bias
Uncertainty
Markov Equilibrium
JEL: 
Q20
C61
C73
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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