No |
SDES-2014-14 |
Title |
Intergenerational games with dynamic externalities and climate change experiments |
Author |
Katerina Sherstyuky, Nori Taruiz, Majah-Leah V. Ravagox, & 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 the future generations' welfare. Second,
even when the incentives are perfectly aligned across generations, increased strategic
uncertainty of an intergenerational setting may lead to an increased inconsistency of
own actions and beliefs about the others, making own actions more myopic. Intergenerational
learning through history and advice from previous generations may improve
dynamic e fficiency, but may also lead to persistent myopic bias. |
Revised version published in |
Journal of the Association of Environmental and Resource Economists |