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Optimal Management with Potential Regime Shifts

Stephen Polasky, Aart de Zeeuw and Florian Wagener

No 10-111/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This discussion paper led to a publication in 'Journal of Environmental Economics and Management' , 62(2), 229-40.

We analyze how the threat of a potential future regime shift affects optimal management. We use a simple general growth model to analyze four cases that involve combinations of stock collapse versus changes in system dynamics, and exogenous versus endogenous probabilities of regime shift. Prior work has focused on stock collapse with endogenous probabilities and reaches ambiguous conclusions about the effect of potential regime shift on optimal management. We show that all other cases yield unambiguous results. In particular, with endogenous probability of regime shift that affects system dynamics the potential for regime shift causes optimal management to become precautionary.

Keywords: optimal management; growth; renewable resources; regime shift (search for similar items in EconPapers)
JEL-codes: C61 E61 O40 Q20 (search for similar items in EconPapers)
Date: 2010-11-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://papers.tinbergen.nl/10111.pdf (application/pdf)

Related works:
Journal Article: Optimal management with potential regime shifts (2011) Downloads
Working Paper: Optimal Management with Potential Regime Shifts (2010) Downloads
Working Paper: Optimal Management with Potential Regime Shifts (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20100111

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