Pollution control with uncertain stock dynamics: When, and how, to be precautious

Journal of Environmental Economics and Management

Volumn 63, Issue 3, 2012, Pages 304-320

  Athanassoglou, Stergios ^a   Xepapadeas, Anastasios ^b  

^a FONDAZIONE ENI ENRICO MATTEI   (Italy)

^b ATHENS UNIVERSITY OF ECONOMICS AND BUSINESS   (Greece)

Author keywords

Knightian uncertainty; Pollution control; Precautionary principle; Robust control; Stock dynamics

Indexed keywords

CONTROL FRAMEWORK; DAMAGE CONTROL; DEGREE OF UNCERTAINTY; ENVIRONMENTAL POLICY; KNIGHTIAN UNCERTAINTY; LINEAR-QUADRATIC MODELS; OPTIMAL INVESTMENTS; OPTIMAL MITIGATION; PRECAUTIONARY PRINCIPLE; PREVENTIVE ACTION; THEORETICAL RESULT;

CLIMATE CHANGE; INVESTMENTS; OPTIMIZATION; POLLUTION CONTROL; POLLUTION INDUCED CORROSION; ROBUST CONTROL;

DYNAMICS;

CLIMATE CHANGE; DECISION MAKING; ENVIRONMENTAL ECONOMICS; ENVIRONMENTAL POLICY; INVESTMENT; OPTIMIZATION; POLICY MAKING; POLLUTION CONTROL; PRECAUTIONARY PRINCIPLE; STOCK ASSESSMENT; UNCERTAINTY ANALYSIS;

KNIGHTIA;

EID: 84858342644     PISSN: 00950696     EISSN: 10960449     Source Type: Journal    
DOI: 10.1016/j.jeem.2011.11.001     Document Type: Article

References (38)

1. Asano T. Precautionary principle and the optimal timing of environmental policy under ambiguity. Environmental and Resource Economics 2010, 47:173-196.
2. Chen Z., Epstein L. Ambiguity, risk, and asset returns in continuous time. Econometrica 2002, 70:1403-1443.
3. Dockner E., Van Long N. International pollution control: cooperative vs. noncooperative strategies. Journal of Environmental Economics and Management 1993, 24:13-29.
4. Ellsberg D. Risk ambiguity and the savage axioms. Quarterly Journal of Economics 1961, 75:643-669.
5. Epstein L., Schneider M. Recursive multiple priors. Journal of Economic Theory 2003, 113:1-31.
6. Fleming W., Souganidis P. On the existence of value function of two-player, zero sum stochastic differential games. Indiana University Mathematics Journal 1989, 3:293-314.
7. Funke M., Paetz M. Environmental policy under model uncertainty: a robust optimal control approach. Climatic Change 2010, 107:225-239.
8. Gilboa I., Schmeidler D. Maxmin expected utility with non-unique prior. Journal of Mathematical Economics 1989, 18:141-153.
9. C. Gollier, J. Gierlinger, Socially Efficient Discounting Under Ambiguity Aversion, Working Paper, 2008.
10. Gonzalez F. Precautionary principle and robustness for a stock pollutant with multiplicative risk. Environmental and Resource Economics 2008, 41:25-46.
11. Hansen L.P., Sargent T. Discounted linear exponential quadratic Gaussian control. IEEE Transactions on Automatic Control 1995, 40:968-971.
12. Hansen L.P., Sargent T. Robust control and model uncertainty. American Economic Review 2001, 91:60-66.
13. Hansen L.P., Sargent T. Recursive robust estimation and control without commitment. Journal of Economic Theory 2007, 136:1-27.
14. Hansen L.P., Sargent T. Robustness 2008, Princeton University Press.
15. Hansen L.P., Sargent T., Turhumambetova G., Williams N. Robust control and model misspecification. Journal of Economic Theory 2006, 128:45-90.
16. Hoel M., Karp L. Taxes versus quotas for a stock pollutant under multiplicative uncertainty. Journal of Public Economics 2001, 82:91-114.
17. Jacobson D. Optimal stochastic linear systems with exponential performance criteria and their relation to deterministic differential games. IEEE Transactions on Automatic Control 1973, AC-18:124-131.
18. James M.R. Asymptotic analysis of nonlinear stochastic risk sensitive control and differential games. Mathematics of Control, Signals and Systems 1992, 5:401-417.
19. James M.R., Elliott R. Risk-sensitive control and dynamic games for partially observed discrete-time nonlinear systems. IEEE Transactions on Automatic Control 1992, 39:780-792.
20. Karatzas I., Shreve S. Brownian Motion and Stochastic Calculus 2006, Springer-Verlag, New York.
21. Karp L., Zhang J. Regulation with anticipated learning about environmental variables. Journal of Environmental Economics and Management 2006, 51:259-279.
22. Klibanoff P., Marinacci M., Mukerji S. A smooth model of decision making under ambiguity. Econometrica 2005, 73:1849-1892.
23. Klibanoff P., Marinacci M., Mukerji S. Recursive smooth ambiguity preferences. Journal of Economic Theory 2009, 144:930-976.
24. Knight F. Risk, Uncertainty, and Profit 1921, Houghton Mifflin, USA.
25. D. Lemoine, C. Traeger, Tipping Points and Ambiguity in the Integrated Assessment of Climate Change, Working Paper.
26. A. Millner, S. Dietz, G. Heal, Ambiguity and Climate Policy, Working Paper, 2010.
27. von Neumann J., Morgenstern O. Theory of Games and Economic Behavior 1944, Princeton University Press.
28. Nordhaus W. A Question of Balance: Economic Modeling of Global Warming 2008, Yale University Press.
29. Roseta-Palma C., Xepapadeas A. Robust control in water management. Journal of Risk and Uncertainty 2004, 29:21-34.
30. Savage L.J. The Foundations of Statistics 1954, Wiley, New York.
31. Stern N. Stern Review: The Economics of Climate Change 2007, Cambridge University Press.
32. Sterner T., Persson M. An even sterner review: introducing relative prices into the discounting debate. Review of Environmental Economics and Policy 2008, 2:61-76.
33. Treich N. The value of a statistical life under ambiguity aversion. Journal of Environmental Economics and Management 2010, 59:15-26.
34. Vardas G., Xepapadeas A. Model uncertainty, ambiguity, and the precautionary principle: implications for biodiversity management. Environmental and Resource Economics 2010, 45:379-404.
35. Weitzman M. On modeling and interpreting the economics of catastrophic climate change. Review of Economics and Statistics 2009, 91:1-19.
36. Weitzman M. What is the "damages function" for global warming and what difference might it make?. Climate Change Economics 2010, 1:57-69.
37. Whittle P. Risk sensitive linear-quadratic control problems. Advances in Applied Probability 1981, 13:764-777.
38. A. Xepapadeas, The Cost of Ambiguity and Robustness in International Pollution Control, Working Paper, 2011.