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Solving optimal timing problems in environmental economics

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Author Info

  • Balikcioglu, Metin
  • Fackler, Paul L.
  • Pindyck, Robert S.

Abstract

Two papers of (Pindyck, 2000) and (Pindyck, 2002) that modeled the control of stock pollutants as optimal stopping problems contained closed form solutions that are incorrect. This paper discusses a subtle error in the derivation and demonstrates how solutions to these and related problems can be obtained numerically. The numerical solutions are contrasted with the ones contained in Pindyck's original papers.

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File URL: http://www.sciencedirect.com/science/article/pii/S0928765511000078
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Bibliographic Info

Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 33 (2011)
Issue (Month): 3 (September)
Pages: 761-768

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Handle: RePEc:eee:resene:v:33:y:2011:i:3:p:761-768

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Web page: http://www.elsevier.com/locate/inca/505569

Related research

Keywords: Environmental policy Uncertainty Optimal stopping Irreveribilities Climate change;

References

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  1. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711.
  2. Pindyck, Robert S., 1998. "Irreversibilities and the timing of environmental policy," Working papers WP 4047-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
  3. Pindyck, Robert S., 2002. "Optimal timing problems in environmental economics," Journal of Economic Dynamics and Control, Elsevier, vol. 26(9-10), pages 1677-1697, August.
  4. Conrad, Jon M., 2000. "Wilderness: options to preserve, extract, or develop," Resource and Energy Economics, Elsevier, vol. 22(3), pages 205-219, July.
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Citations

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Cited by:
  1. Elettra Agliardi & Luigi Sereno, 2013. "On the Optimal Timing of Switching from non-Renewable to Renewable Resources: Dirty vs Clean Energy Sources and the Relative Efficiency of Generators," Working Paper Series 11_13, The Rimini Centre for Economic Analysis.
  2. Niko Jaakkola, 2013. "Green Technologies and the Protracted End to the Age of Oil: A strategic analysis," OxCarre Working Papers 099, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  3. Agliardi, Elettra & Sereno, Luigi, 2012. "Environmental protection, public finance requirements and the timing of emission reductions," Environment and Development Economics, Cambridge University Press, vol. 17(06), pages 715-739, December.
  4. Dumortier, Jerome, 2012. "Welfare changes associated with forest carbon offset credits in the United States," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124632, Agricultural and Applied Economics Association.

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