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Bifurcations of optimal vector fields in the shallow lake model

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  • Kiseleva, Tatiana
  • Wagener, F.O.O.

Abstract

The solution structure of the set of optimal solutions of the shallow lake problem, a problem of optimal pollution management, is studied as we vary the values of the system parameters: the natural resilience, the relative importance of the resource for social welfare and the future discount rate. We find parameter values at which qualitative changes occur. Using theoretical results on the bifurcations of the solution structure to infinite horizon optimization problems obtained earlier, we give a fairly complete bifurcation analysis of the shallow lake problem. In particular, we show how the increase of the discount rate affects the parameter regions where an oligotrophic steady state, corresponding to low pollution level, is globally stable or locally stable under optimal dynamics. Asymptotically, an increase of the discount rate can be offset with a proportional increase of the relative social weight of the resource.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 34 (2010)
Issue (Month): 5 (May)
Pages: 825-843

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Handle: RePEc:eee:dyncon:v:34:y:2010:i:5:p:825-843

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Web page: http://www.elsevier.com/locate/jedc

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Keywords: Optimal vector fields Indifference points Bifurcations Shallow lake;

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References

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  1. Wagener, F.O.O., 2009. "Shallow lake economics run deep: Nonlinear aspects of an economic-ecological interest conflict," CeNDEF Working Papers 09-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  2. Wagener, F. O. O., 2003. "Skiba points and heteroclinic bifurcations, with applications to the shallow lake system," Journal of Economic Dynamics and Control, Elsevier, vol. 27(9), pages 1533-1561, July.
  3. Karl-Göran Mäler & Anastasios Xepapadeas & Aart de Zeeuw, 2003. "The Economics of Shallow Lakes," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(4), pages 603-624, December.
  4. W.A. Brock & D. Starrett, 2003. "Managing Systems with Non-convex Positive Feedback," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 26(4), pages 575-602, December.
  5. Wagener, F.O.O., 2003. "Structural analysis of optimal investment for firms with non-concave production," CeNDEF Working Papers 03-08, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
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Cited by:
  1. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2011. "From Mind to Market: A Global, Dynamic Analysis of R&D," Tinbergen Institute Discussion Papers 11-139/1, Tinbergen Institute.
  2. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2011. "From Mind to Market: A Global, Dynamic Analysis of R&D," Tinbergen Institute Discussion Papers 11-139/1, Tinbergen Institute.
  3. Caulkins, Jonathan P. & Feichtinger, Gustav & Grass, Dieter & Hartl, Richard F. & Kort, Peter M., 2011. "Two state capital accumulation with heterogenous products: Disruptive vs. non-disruptive goods," Journal of Economic Dynamics and Control, Elsevier, vol. 35(4), pages 462-478, April.
  4. Kiseleva, T. & Wagener, F.O.O., 2011. "Bifurcations of Optimal Vector Fields," CeNDEF Working Papers 11-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  5. Hinloopen, J. & Smrkolj, G. & Wagener, F.O.O., 2013. "In Defense of Trusts: R&D Cooperation in Global Perspective," CeNDEF Working Papers 13-05, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  6. Reddy, P.V. & Schumacher, J.M. & Engwerda, J.C., 2012. "Optimal Management and Differential Games in the Presence of Threshold Effects - The Shallow Lake Model," Discussion Paper 2012-001, Tilburg University, Center for Economic Research.
  7. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2013. "In Defense of Trusts: R&D Cooperation in Global Perspective," Tinbergen Institute Discussion Papers 13-045/II, Tinbergen Institute, revised 04 Mar 2014.

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