Irreversible Investments Revisited
AbstractA non-linear dynamic model in two state variables, two controls and three cost terms is presented for the purpose of finding the optimal combination of exploitation and capital investment in optimal renewable resource management. Non-malleability of capital is, in other words, incorporated in the model through an asymmetric convex cost-function of investment, and investments can be both positive and negative. Exploitation is controlled through the utilisation rate of available capital. A novel feature in this model is that there are fixed costs associated with the available capital whether it is utilised or not. In contrast to most of the previous literature both state variables enter the objective function.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2006/11.
Length: 20 pages
Date of creation: 11 Oct 2006
Date of revision:
Contact details of provider:
Postal: NHH, Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Phone: +47 55 95 92 93
Fax: +47 55 95 96 50
Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
More information through EDIRC
Irreversible investments; non-malleable capital; renewable resources;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-21 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- McKelvey, Robert, 1985. "Decentralized regulation of a common property renewable resource industry with irreversible investment," Journal of Environmental Economics and Management, Elsevier, vol. 12(4), pages 287-307, December.
- Sandal, Leif K. & Steinshamn, Stein Ivar, 1997. "Optimal Steady States And The Effects Of Discounting," Marine Resource Economics, Marine Resources Foundation, vol. 12(2).
- Clark, Colin W & Clarke, Frank H & Munro, Gordon R, 1979. "The Optimal Exploitation of Renewable Resource Stocks: Problems of Irreversible Investment," Econometrica, Econometric Society, vol. 47(1), pages 25-47, January.
- Brunner, Martin & Strulik, Holger, 2002.
"Solution of perfect foresight saddlepoint problems: a simple method and applications,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 26(5), pages 737-753, May.
- Martin Brunner & Holger Strulik, 2002. "Code for "Solution of Perfect Foresight Sattlepoint Problems: A Simple Method and Applications"," QM&RBC Codes 93, Quantitative Macroeconomics & Real Business Cycles.
- Boyce John R., 1995. "Optimal Capital Accumulation in a Fishery: A Nonlinear Irreversible Investment Model," Journal of Environmental Economics and Management, Elsevier, vol. 28(3), pages 324-339, May.
- Charles, Anthony T. & Munro, Gordon R., 1985. "Irreversible Investment and Optimal Fisheries Management: A Stochastic Analysis," Marine Resource Economics, Marine Resources Foundation, vol. 1(3).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stein Fossen).
If references are entirely missing, you can add them using this form.