Incentive equilibrium in an overlapping-generations environmental game ?
We consider two overlapping generations that want to coordinate their strategies of working, consuming and controlling pollution. Since the cooperative solution is not an equilibrium, and hence is not a self-enforcing contract, a mechanism is required to sustain it. We show how incentive strategies, and the resulting incentive equilibrium, could provide such a mechanism. We also derive the conditions that ensure the credibility of these strategies.
incentive strategies credibility overlapping-generations models environment