Sammendrag
A growing body of evidence suggests that individuals have time-inconsistent preferences. Even when they do not, policy makers who fear to loose elections will
apply discount rates that decrease in relative time when they consider investment
projects. To ináuence future choices, current strategic investments or investment
subsidies should be larger for technologies that are strategic complements to future
investments, further upstream in the supply chain, and characterized by longer maturity. A quantitative assessment suggests that time inconsistency can rationalize
subsidies at similar levels as market failures such as externalities can. Furthermore,
the two e§ects are superadditive: Time inconsistency and strategic investments are
thus especially important for long-term policies associated with externalities.
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