Optimal control of an invasive species with imperfect information about the level of infestation

The presence of invasive species is often not realized until well after the species becomes established. Discovering the location and extent of infestation before the invasive species causes widespread damage typically requires intensive monitoring efforts. In this paper, we analyze the problem of controlling an invasive species when there is imperfect information about the degree of infestation. We model the problem as a partially observable Markov decision process in which the decision-maker receives an imperfect signal about the level of infestation. The decision-maker then chooses a management action to minimize expected costs based on beliefs about the level of infestation. We apply this model to a simple application with three possible levels of infestation where the decision-maker can choose to take no action, only monitor, only treat, or do both monitoring and treatment jointly. We solve for optimal management as a function of beliefs about the level of infestation. For a case with positive monitoring and treatment costs, we find that the optimal policy involves choosing no action when there is a sufficiently large probability of no infestation, monitoring alone with intermediate probability values and treatment alone when the probability of moderate or high infestation is large. We also show how optimal management and expected costs change as the cost or quality of information from monitoring changes. With costless and perfect monitoring, expected costs are 20–30% lower across the range of belief states relative to the expected costs without monitoring.     

Mountain-to-sea ecological-resource management: Forested watersheds,coastal aquifers,and groundwater dependent ecosystems

Improving the understanding of connections spanning from mountain to sea and integrating those connections into decision models have been increasingly recognized as key to effective coastal resource management. In this paper, we aim to improve our understanding of the relative importance of linkages between a forested watershed, a coastal groundwater aquifer, and a nearshore marine groundwater-dependent ecosystem (GDE) using a dynamic groundwater optimization framework and simple ecosystem equations. Data from the Kīholo aquifer on the Kona Coast of Hawai‘i Island are used to numerically illustrate optimal joint management strategies and test the sensitivity of those strategies to variations in physical and behavioral parameter values. We find that for a plausible range of watershed management costs, protecting part of the recharge capture area is always optimal. Without watershed protection, maintaining a safe minimum standard growth rate for a GDE-dependent marine indicator species, reduces net present value non-trivially, but optimal investment in watershed conservation offsets that potential reduction by 75 %. In general, we find that optimal watershed management and groundwater pumping are most sensitive to changes in water demand growth and parameters that describe nearshore salinity.     

An options based bioeconomic model for biological and chemical control of invasive species

The management of non-native invasive species is a complex but crucial task given the potential for economic and environmental damages. For many invasions the development of socially optimal control strategies requires more than is offered by the single-species, single-control models that have dominated this area of research. We develop a general stochastic optimal control framework that accommodates multiple interacting species while accounting for uncertainty in the temporal population dynamics. This extension to the current line of bioeconomic control models allows for the design of optimal integrated pest management strategies that utilize both chemical and biological controls in an environment of uncertainty and irreversibility. We demonstrate the benefits of combining chemical and biological controls in long term management strategies through a case study of the hemlock wooly adelgid (Adelges tsugae) infestation in the eastern United States. In this application we find that the introduction of natural predators is usually sufficient to manage the infestation, though chemical insecticides can play an important role when detection of the infestation is delayed or when the biological control agent does not sufficiently increase mortality of the invasive species.     

环境不确定情境下组织韧性影响路径、作用机制与应对策略研究

韧性作为探究组织—环境互动机理的方法，有助于企业在逆境中化危为机、借机成势。基于过程视角，打开环境不确定情境下组织韧性响应的“黑箱”,构建“暴露期(激活韧性)—发展期(调动韧性)—恢复期(发挥韧性)”研究框架。研究发现：环境作为企业的信息源和资源池，不确定性通过信息认知和资源依赖两条路径影响组织韧性；为应对环境不确定性，组织韧性通过探测机制和缓冲机制降低信息模糊，进而突破资源瓶颈。因此，应综合判断企业外部环境状况和组织自身禀赋，选择适应、更新和突破3种组织韧性应对策略。     

Optimal emission-extraction policy in a world of scarcity and irreversibility

This paper extends the classical exhaustible-resource/stock-pollution model with irreversibility of pollution decay, meaning that after reaching some threshold there is no decay of the pollution stock. Within this framework, we answer the question how the potential irreversibility of pollution affects the extraction path. We investigate the conditions under which the economy will optimally adopt a reversible policy, and when it is optimal to enter the irreversible region. In the case of irreversibility it may be optimal to leave a positive amount of resource in the ground forever. As far as the optimal extraction/emission policy is concerned, several types of solutions may arise, including solutions where the economy stays at the threshold for a while. Given that different programs may satisfy the first order conditions for optimality, we further investigate when each of these is optimal. We show that it is never optimal for the economy to stay at the threshold for a while before entering the irreversible region. The optimality analysis is then illustrated by means of a calibrated example. To sum up, for any pollution level, we can identify a critical resource stock such that there exist multiple optima i.e. a reversible and an irreversible policy that yield exactly the same present value. For any resource stock below this critical value, the optimal policy is reversible whereas with large enough resources, irreversible policies outperform reversible programs.     

Optimal emission-extraction policy in a world of scarcity and irreversibility

This paper extends the classical exhaustible-resource/stock-pollution model with irreversibility of pollution decay, meaning that after reaching some threshold there is no decay of the pollution stock. Within this framework, we answer the question how the potential irreversibility of pollution affects the extraction path. We investigate the conditions under which the economy will optimally adopt a reversible policy, and when it is optimal to enter the irreversible region. In the case of irreversibility it may be optimal to leave a positive amount of resource in the ground forever. As far as the optimal extraction/emission policy is concerned, several types of solutions may arise, including solutions where the economy stays at the threshold for a while. Given that different programs may satisfy the first order conditions for optimality, we further investigate when each of these is optimal. We show that it is never optimal for the economy to stay at the threshold for a while before entering the irreversible region. The optimality analysis is then illustrated by means of a calibrated example. To sum up, for any pollution level, we can identify a critical resource stock such that there exist multiple optima i.e. a reversible and an irreversible policy that yield exactly the same present value. For any resource stock below this critical value, the optimal policy is reversible whereas with large enough resources, irreversible policies outperform reversible programs.     

DYNAMIC MECHANISM DESIGN FOR A GLOBAL COMMONS

We model dynamic mechanisms for a global commons. Countries value both consumption and conservation of an open access resource. A country's relative value of consumption to conservation is privately observed and evolves stochastically. An optimal quota maximizes world welfare subject to being implementable by Perfect Bayesian equilibria. With complete information, the optimal quota is first best; it allocates more of the resource each period to countries with high consumption value. Under incomplete information, the optimal quota is fully compressed: Identical countries receive the same quota even as environmental costs and resource needs differ. This is true even when private information is negligible.     

A step beside the maximin path: Can we sustain the economy by following Hartwick's investment rule?

If sustainability is interpreted as the requirement to sustain consumption or utility at an optimal level, a maximin objective appears to be relevant. The sustained economy is characterized by an optimal investment following Hartwick's investment rule. This paper examines how the sustainability of a production-consumption economy with a non-renewable resource is modified in the neighborhood of the maximin path, i.e. when the consumption and the resource price are not optimal. A Sustainable Consumption Indicator is introduced in order to characterize the sustainability of constant consumption paths, defined as deviations from the maximin path. We describe how an over-consumption jeopardizes future sustainability.     

Toward a theory of optimal economic systems

This paper develops a framework for theoretical analysis of optimal economic systems that synthesizes and extends many common themes found in the works of both theorists and comparativists. An economy's institutional characteristics are abstractly represented by three structures (the information, decision-making, and incentive structures) comprising the economic system. Attention is given to the fact that economic systems influence both the objective functions of, and the strategies employed by, an economy's members. Existence theorems on optimal economic systems are presented to show that the framework is not vacuous and to illustrate the problems involved in selecting an optimal economic system.     

Optimal collective contract without peer information or peer monitoring

If entrepreneurs have private information about factors influencing the outcome of an investment, individual lending is inefficient. The literature typically offers solutions based on the assumption of full peer information to solve adverse selection problems and peer monitoring to solve moral hazard problems. In contrast, I show that it is possible to construct a simple budget-balanced mechanism that implements the efficient outcome even if each borrower knows only own type and effort, and has neither privileged knowledge about others nor monitoring ability. The mechanism satisfies participation incentives for all types, and is immune to the Rothschild–Stiglitz cream skimming problem despite using transfers from better types to worse types. The presence of some local information implies that the mechanism cannot be successfully used by formal lenders. Thus a local credit institution can emerge as an optimal response to the informational environment even without peer information or monitoring. Finally, I investigate the role of monitoring in this setting and show how costly monitoring can increase the scope of the mechanism.     

On Impatience, Economic Growth and the Environmental Kuznets Curve: A Dynamic Analysis of Resource Management

The paper presents a dynamic analysis of natural resource management and investigates some key factors that affect optimal management and resource conservation.Using a recursive specification of time preferences, we show how endogenous discounting and impatience can affect the motivation for both capital investments and environmental preservation. We examine the relationships between economic growth and environmental quality. Endogenous discounting provides new insights in the economic dynamics underlying the environmental Kuznets curve. By treating growth as endogenous, we examine how externalities and economic growth interact with each other. We investigate how economic development can contribute to an increased demand for environmental preservation. As an important new result, we also show how poverty can contribute to environmental degradation.     

The economics of harvesting predator-prey systems

The economics of harvesting a renewable natural resource is well-developed in a framework where environmental conditions of the species looked at are kept constant. For the case of two interacting species as a prey-predator relationship the economics of harvesting one of the two species is analyzed. Questions of existence, uniqueness, and stability are looked at. Applying optimal control theory, a modified golden rule of harvesting is derived.     

Informational properties of the Nash solutions of two stochastic nonzero-sum games

Within the framework of stochastic two-person nonzero-sum games, we deal with two commonly used models in engineering and economics—namely, the LQG (Linear-Quadratic-Gaussian) and the duopoly problems. We investigate how variations in information available to either player affect the equilibrium Nash strategies for these two models, whose existence and uniqueness have been proven in the paper. We show that for the LQG model better information for either player results in lower average Nash costs for both players; whereas for the duopoly model better information for one player helps him alone to achieve a higher average Nash profit, and it hurts the other player in the sense that his average Nash profit decreases. We further relate these properties of the Nash solutions for these two games to some of the distinct features of zero-sum games and team problems.     

Reorganization strategies and securities valuation under asymmetric information

This paper examines optimal reorganization strategies during financial distress and securities valuation under asymmetric information. We model strategic interactions between debtholders and equityholders in a game-theoretic setting that can accommodate the varying bargaining powers of the two claimants. Two reorganization strategies are considered: Chapter 11 (debt–equity swap) and private workout (strategic debt service). Using Chapter 11 as a costly state verification device, we characterize in equilibrium which firms choose Chapter 11 and which choose private workout. In particular, we show how the bank's belief about the type of firm evolves by observation of reorganization strategies. We also derive closed-form solutions to both the equity and debt valuation problems under asymmetric information and show that credit spreads increase with the degrees of asymmetric information.     

Ranking agencies under moral hazard

Summary. We provide rankings across uncertain outputs generated by agents functioning within the Principal-Agent paradigm. For agents who are identical except for their productivity, a necessary (but not sufficient) condition for an agent to be preferred is that her output dominates that of lower agents in the sense of First Degree Stochastic Dominance (FDSD) at every level of effort. Sufficient conditions are based on Blackwells ranking of information systems and involves a characterization of FDSD using stochastic matrices. Our conditions for ranking outputs extends earlier results concerning the value of information within the agency framework. We also show how our techniques can be adapted to rank agents even if the first-order approach for determining optimal contracts fails to hold.Received: April 2, 1996; revised version: October 30, 1996This revised version was published online in February 2005 with corrections to the cover date.     

Environment,Directed Technical Change and Economic Policy

We study the effects of an economic policy in an endogenous growth general equilibrium framework where production of consumption goods requires two resource inputs: a polluting non-renewable resource and a non-polluting labour resource. The use of the former contributes to the accumulation of pollution in the atmosphere, which affects welfare. There is a specific research sector associated with each of those resources. We provide a full welfare analysis, and we describe the equilibrium paths in a decentralized economy. We go on to study the effects of three associated economic policy tools: a tax on the polluting resource, and two research subsidies. We show that the optimal environmental policy has two main effects; it delays the extraction of the resource and with it the level of polluting emissions and it reallocates research efforts, decreasing the amount put into “grey” research to the benefit of “green” research. We also show that the environmental policy is grey-biased in the short-term, and green-biased in the long-term. Finally, we compute the optimal values for these tools.      

Beyond the lamppost: Optimal prevention and control of the Brown Tree Snake in Hawaii

We develop an integrated model for the prevention and control of an invasive species. The generality of the model allows its use for both existing and potential threats to the system of interest. The deterministic nature of arrivals in the model enables clear examination of the tradeoffs inherent when choosing between prevention and control strategies. We illuminate how optimal expenditure paths change in response to various biological and economic parameters for the case of the Brown Tree Snake in Hawaii. Results suggest that it is more advantageous to spend money finding the small population of snakes as they occur than attempting to prevent all future introductions. Like the drunk that looks for his keys only where the light is, public policy may fail to look “beyond the lamppost” for snakes that have already arrived but have not yet been detected. Actively searching for a potential population of snakes rather than waiting for an accidental discovery may save Hawaii tens to hundreds of millions of dollars in future damages, interdiction expenditures, and control costs.     

Resource orchestration for innovation: the dual role of information technology

The question of how information technology-both as an operand resource and as an operant resource-impacts on innovation processes and innovation outcomes remains largely uninvestigated in the manufacturing enterprises. Building on an in-depth case study of a manufacturing enterprise in China, we present a resource orchestration for innovation model and examine the dual role of IT in three distinct innovation processes. The model highlights the multilevel nature of the computerisation process, showing that it entails different IT role and be associated with a particular innovation outcome at each process. This study synthesises resource orchestration framework and IT concepts to elaborate the synergistic relationships between various resources at all levels both inside and between enterprises. Our study not only contributes to broadening the theoretical perspectives by exploring the dual role of IT in managerial issues but also provides some practical suggestions for business leaders to facilitate innovation processes.     

Optimal monitoring of credit-based emissions trading under asymmetric information

Project-based emissions trading schemes, like the Clean Development Mechanism, are particularly prone to problems of asymmetric information between project parties and the regulator. In this paper, we extend the general framework on incomplete enforcement of policy instruments to reflect the particularities of credit-based mechanisms. The main focus of the analysis is to determine the regulator??s optimal spot-check frequency given plausible assumptions of incomplete enforcement under asymmetric information on reduction costs and heterogeneous verifiability of projects. We find that, depending on the actual abatement cost and penalty schemes, optimal monitoring for credit-based systems is often discontinuous and significantly differs from the one to be applied for cap-and-trade schemes or environmental taxes. We conclude that, in a real-world context, project admission should ultimately be based on the criterion of verifiability.