Energy Pricing and Carbon Emission Based on Hyperbolic Discounting Preference

On the basis of a binary stochastic differential game model representing the relationship between cartelized energy suppliers and a government on behalf of consumers, we study the decision-making behaviors of a government and suppliers with time-inconsistent preference in both cooperative and non-cooperative scenarios by making comparison with the benchmark model for game players with time-consistent preference in this paper. The results show that, regardless of a cooperative or non-cooperative game, at the initial time, the consumer price given by game players with time-consistent preferences is higher than that given by game players with time-inconsistent preferences, while the carbon emissions given by the former are lower than the latter. Especially at the terminal time, the carbon emissions from naive players are lower than that from sophisticate players.