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A dynamic programming approach to optimal pollution control under uncertain irreversibility: The Poisson case

Author

Listed:
  • Raouf Boucekkine

    (Rennes School of Business)

  • Carmen Camacho

    (Paris School of Economics & CNRS)

  • Weihua Ruan

    (Purdue University Northwest)

  • Benteng Zou

    (Université du Luxembourg)

Abstract

We solve a bimodal optimal control problem with a non-concavity and uncertainty through a Poisson process underlying the transition from a mode to another. We use a dynamic programming approach and are able to uncover the global optimal dynamics (including optimal non-monotonic paths) under a few linear-quadratic assumption, which do not get rid of the non-concavity of the problem. This is in contrast to the related literature on pollution control under irreversibility which usually explores local dynamics along monotonic solution paths to first-order Pontryagin conditions.

Suggested Citation

  • Raouf Boucekkine & Carmen Camacho & Weihua Ruan & Benteng Zou, 2022. "A dynamic programming approach to optimal pollution control under uncertain irreversibility: The Poisson case," DEM Discussion Paper Series 22-10, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:22-10
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    File URL: http://hdl.handle.net/10993/51922
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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • Q53 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Air Pollution; Water Pollution; Noise; Hazardous Waste; Solid Waste; Recycling

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