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Heterogeneous Patience, Bargaining Power and Investment in Future Public Goods

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  • Ram Fishman

    (Tel Aviv University)

Abstract

In many environmental contexts, including climate change mitigation, agents face investment opportunities that have shared, but greatly delayed benefits. Efficient levels of aggregate investment therefore require collective action, but they are also highly sensitive to the choice of discount rate. Motivated by empirical evidence that suggests discount rates vary considerably, this paper investigates the impact of heterogeneity in discount rates on sharing of investment costs. An application of the canonical bargaining model shows that the larger share of the costs gradually shifts from impatient to patient agents as the time horizon increases.

Suggested Citation

  • Ram Fishman, 2019. "Heterogeneous Patience, Bargaining Power and Investment in Future Public Goods," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(4), pages 1101-1107, August.
    • Handle: RePEc:kap:enreec:v:73:y:2019:i:4:d:10.1007_s10640-018-0291-3
    DOI: 10.1007/s10640-018-0291-3
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    References listed on IDEAS

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    11. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
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    Cited by:

    1. Francesca Flamini, 2023. "The Role of the Status-Quo in Dynamic Bargaining," Games, MDPI, vol. 14(3), pages 1-20, April.

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    More about this item

    Keywords

    Discounting; Heterogeneity; Bargaining; Public goods; Climate change; International agreements;
    All these keywords.

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental 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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