Present Bias in Renewable Resources Management Reduces Agent's Welfare

Abstract

This paper analyses the effects of myopic and present-biased preferences on the welfare of a naive agent when she is engaged in an intertemporal harvesting activity from a stock of renewable resources. The analysis is conducted by taking into account also the nature of present-biased behaviors as phenomena that is derived from a dual system of discounting and of response to short and long-term stimuli.

In the task of harvesting from a stock of renewable resources, the present biased preferences of a naive agent create a conflict between the long run benefit of the agent and the short run desire.

Thus, this paper demonstrates and argues that in the decision-making, which involves intertemporal choices in renewable resources management, the prevalence of naive behavior, strongly influenced by the emotional-affective system, can lead to a reduction in the overall utility enjoyed by the individual due to the present bias.

Keywords: Present bias, naive agent, intertemporal choice, harvesting, dual system discounting

JEL Classification: D15, D90, Q20