Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/127219 
Authors: 
Year of Publication: 
2004
Series/Report no.: 
Discussion Paper Series No. 402
Publisher: 
University of Heidelberg, Department of Economics, Heidelberg
Abstract: 
In this paper I extend the well known result that a hyperbolically discounting agent postpones costs into the future. If society has hyperbolic inter-temporal preferences, it may be optimal from an ex ante point of view to postpone structural change from a polluting to a non polluting production sector into the future (ex ante procrastination). The consequences of ex ante procrastination are discussed for three different behavioral patterns. I show that, depending on the assumed behavioral regime, ex ante procrastination may lead to ex post procrastination, i.e. de facto no investment in the non polluting sector is undertaken over the whole time horizon, although investment was optimal from an ex ante point of view. Furthermore, the ex post implemented investment plan may be inefficient if it is not dictatorial. Hence, in the case of hyperbolic preferences there is a potential trade-off between inter-temporal efficiency and equity.
Subjects: 
dynamic optimization
emission abatement
hyperbolic preferences
intergenerational equity
inter temporal decision theory
procrastination
JEL: 
D91
Q25
C61
Document Type: 
Working Paper

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