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Intergenerational Games with Dynamic Externalities and Climate Change Experiments

Author

Listed:
  • Katerina Sherstyuk
  • Nori Tarui
  • Majah-Leah V. Ravago
  • Tatsuyoshi Saijo
Abstract
Dynamic externalities are at the core of many long-term environmental problems, from species preservation to climate change mitigation. We use laboratory experiments to compare welfare outcomes and underlying behavior in games with dynamic externalities under two distinct settings: traditionally studied games with infinitely-lived decision makers, and more realistic intergenerational games. We show that if decision makers change across generations, resolving dynamic externalities becomes more challenging for two distinct reasons. First, decision makers’ actions may be short-sighted due to their limited incentives to care about future generations’ welfare. Second, even when the incentives are perfectly aligned across generations, the increased strategic uncertainty of the intergenerational setting may lead to an increased inconsistency of own actions and beliefs about others, making own actions more myopic. Access to history and advice from previous generations may improve dynamic efficiency but may also facilitate coordination on noncooperative action paths.

Suggested Citation

  • Katerina Sherstyuk & Nori Tarui & Majah-Leah V. Ravago & Tatsuyoshi Saijo, 2016. "Intergenerational Games with Dynamic Externalities and Climate Change Experiments," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(2), pages 247-281.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/684162
    DOI: 10.1086/684162
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    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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