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
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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) 
Working Paper: Optimal Management with Potential Regime Shifts (2010) 
Working Paper: Optimal Management with Potential Regime Shifts (2010) 
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20100111
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