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| Author: | Polasky, S. Zeeuw, A. de Wagener, F. |
| Title: | Optimal management with potential regime shifts |
| Journal: | Journal of Environmental Economics and Management
2011 : SEP, VOL. 62:2, p. 229-240 |
| Index terms: | management growth renewable resources |
| Freeterms: | regime shifts |
| Language: | eng |
| Abstract: | We study the effect of a potential regime shift threat on optimal management. A simple general growth model is used to analyze four cases involving combinations of stock collapse versus system dynamics changes, and exogenous versus endogenous probabilities of regime shift. Prior work in economics has emphasized stock collapse with endogenous probabilities, reaching ambiguous conclusions on whether the possibility for regime shift will increase or decrease the intensity of resource use and the level of resource stock. We demonstrate that all other cases yield unambiguous results. Especially, with endogenous probability of regime shift affecting system dynamics, the potential for regime shift results in optimal management becoming precautionary in the sense of sustaining higher resource stock levels. |
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