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Investment Option Game for Controlling Global Stock Pollution under Uncertainty

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Listed:
  • Hojeong Park

    (Korea University)

Abstract

Stock pollution involves a tradeoff between irreversible environmental impacts and investment costs. Such a tradeoff creates opposing incentives between early- and late-policy adoptions to reduce stock pollution emissions. Earlier studies consider the effects of the uncertainty of environmental impacts on investment timing. This paper extends these studies by considering interactions between two players in order to abate stock pollution. When the uncertainty of environmental damage exists, the absence of cooperative policy may result in further environmental damage because the irreversibility of investments dominates that of environmental damages.

Suggested Citation

  • Hojeong Park, 2011. "Investment Option Game for Controlling Global Stock Pollution under Uncertainty," Korean Economic Review, Korean Economic Association, vol. 27, pages 75-91.
    • Handle: RePEc:kea:keappr:ker-20110630-27-1-04
    as

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    References listed on IDEAS

    as
    1. Kolstad, Charles D., 1996. "Learning and Stock Effects in Environmental Regulation: The Case of Greenhouse Gas Emissions," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 1-18, July.
    2. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    3. Helen Weeds, 2002. "Strategic Delay in a Real Options Model of R&D Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 729-747.
    4. Pindyck, Robert S., 2000. "Irreversibilities and the timing of environmental policy," Resource and Energy Economics, Elsevier, vol. 22(3), pages 233-259, July.
    5. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Stock Pollutant; Investment; Irreversibility; Real Option;
    All these keywords.

    JEL classification:

    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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