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Catastrophes, delays, and learning

François Salanié and Matti Liski

No 20-1148, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: How to plan for catastrophes that may be under way? In a simple but general model of experimentation, a decision-maker chooses a flow variable contributing to a stock that may trigger a catastrophe at each untried level. Once triggered, the catastrophe itself occurs only after a stochastic delay. Consequently, the rhythm of past experimentations determines the arrival of information. This has strong implications for policies in situations where the planner inherits a history of experiments, like climate change and pandemic crisis. The structure encompasses canonical approaches in the literature.

Keywords: catastrophes; experimentation; delays (search for similar items in EconPapers)
JEL-codes: C61 D81 Q54 (search for similar items in EconPapers)
Date: 2020-09-24
New Economics Papers: this item is included in nep-env, nep-mic and nep-ore
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