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Solving optimal timing problems in environmental economics

Author

Listed:
  • 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.

Suggested Citation

  • Balikcioglu, Metin & Fackler, Paul L. & Pindyck, Robert S., 2011. "Solving optimal timing problems in environmental economics," Resource and Energy Economics, Elsevier, vol. 33(3), pages 761-768, September.
    • Handle: RePEc:eee:resene:v:33:y:2011:i:3:p:761-768
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    References listed on IDEAS

    as
    1. Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, December.
    2. Pindyck, Robert S., 2000. "Irreversibilities and the timing of environmental policy," Resource and Energy Economics, Elsevier, vol. 22(3), pages 233-259, July.
    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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