CERE Working Papers,
CERE - the Center for Environmental and Resource Economics

Abstract: The paper analyzes the effects of present-biased preferences on the transfer of resources to future generations in the framework of renewable resource harvesting. The paper assumes that the current generation has other-regarding motivations for future generations, expressed through the adherence to spontaneous other-regarding preferences or social norms. Because the short-sighted behavior imposed by the “dictatorship of the present” can cause a reduction in the well-being of future generations, despite the existence of social preferences, the model presented in this study demonstrates that if the social preferences are also expressed through social norms that prescribe no reevaluation of the harvesting decisions, a mitigation of the effect of present bias on intergenerational equity can occur. In this paper, the model presented shows the properties that a social norm should have to avoid the intergenerational inequality that can be derived from present-biased preferences in intergenerational renewable resource management. Additionally, the model defines the necessary and sufficient conditions such that the implementation of the social norm can neutralize the effect of present-biased preferences, guaranteeing the optimal harvesting path defined at the beginning.

Keywords: Present bias; naive agent; intergenerational resource management; renewable resources; harvesting; other-regarding preferences; social norms

JEL-codes: D01; D03; D15; D90; D91

33 pages, May 20, 2021

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