Solving optimal timing problems in environmental economics |
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| Authors: | Metin Balikcioglu Paul L Fackler Robert S Pindyck |
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| Institution: | 1. SAS Institute Inc. Cary, NC 27513, USA;2. North Carolina State University, Department of Agricultural and Resource Economics, Raleigh, NC 27695, USA;3. Massachusetts Institute of Technology, Sloan School of Management, Cambridge, MA 02142, USA |
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| Abstract: | Two papers of Pindyck, 2000, Pindyck, 2002 that modeled the control of stock pollutants as optimal stopping problems contained closed form solutions that are incorrect. This paper discusses a subtle error in the derivation and demonstrates how solutions to these and related problems can be obtained numerically. The numerical solutions are contrasted with the ones contained in Pindyck's original papers. |
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