| Geir Asheim (University of Oslo). |
| Generations playing a Chichilnisky game |
| (with Ivar Ekeland, Yiming Long and Qinglong Zhou)) |
| Abstract The Chichilnisky criterion of intergenerational equity is time-inconsistent and has no optimal solution in the Ramsey model. Hence, seeking optimality is both irrelevant and futile. This paper investigates Markov-perfect equilibria in the game that generations with Chichilnisky preferences play in the Ramsey model. The time-discounted utilitarian optimum is the unique equilibrium path the when the initial stock is small, implying that the weight on the in nite future in the Chichilnisky criterion plays no role. However, this part of the Chichilnisky criterion may lead to more stock conservation than the time-discounted utilitarian optimum if the initial stock is large. Uniqueness is obtained by assuming that each generation coordinates on a(n) (almost) best equilibrium and takes into account that future generations will do as well. This analysis of uniqueness is based on von Neumann-Morgenstern stability. |