Open AccessOPTIMAL REGULATION OF NATURAL RESOURCES IN THE PRESENCE OF IRREVERSIBLE THRESHOLD EFFECTS
Author(s) -
NÆVDAL ERIC
Publication year - 2003
Publication title -
natural resource modeling
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.28
H-Index - 32
eISSN - 1939-7445
pISSN - 0890-8575
DOI - 10.1111/j.1939-7445.2003.tb00116.x
Subject(s) - threshold model , state space , natural resource , space (punctuation) , point (geometry) , state (computer science) , natural (archaeology) , resource (disambiguation) , computer science , mathematical optimization , mathematical economics , economics , mathematics , econometrics , ecology , statistics , biology , algorithm , paleontology , computer network , geometry , operating system
. Thresholds are an important physical consideration in the regulation of natural resources. This paper is the first to present a complete analytical framework in which to evaluate optimal regulation of a natural resource in the presence of irreversible threshold effects. Necessary conditions are presented for optimal regulation of these problems both for when the threshold has a known location in state‐space and for when the location of the threshold is unknown. In the case where the location is known, the literature is corrected on a seemingly minor technical point regarding the behavior of the co‐state variables that turns out to be of considerable importance. For the case when the location of the threshold is not known, it is shown that thresholds in state‐space implies a nonstandard risk structure.