Land conversion pace under uncertainty and irreversibility: too fast or too slow?

Corato, Luca Di; Moretto, Michele; Vergalli, Sergio

doi:10.1007/s00712-013-0348-2

“…Stopping further market entries No cap on aggregate investment Among the other studies that have adopted the Bartolini (1993) framework, the most prominent ones are, Moretto and Vergalli (2010) and Di Corato, Moretto and Vergalli (2013). Moretto and Vergalli (2010) study how a cap on immigration set by the government of a host country affects the decision of potential migrants.…”

Section: Optimal Policymentioning

confidence: 99%

“…Moretto and Vergalli (2013) study the dynamic characterizing the conversion of forestland into agricultural land in the short and in the long run. Forest 7 conservation secures the provision of public goods and services for which private landowners are not compensated.…”

mentioning

confidence: 99%

Production externalities and investment caps: A welfare analysis under uncertainty

Corato

¹

,

Maoz

²

2019

Journal of Economic Dynamics and Control

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In m arkets w here production has adverse externalities, policy m akers m ay w ish to increase w elfare by im posing a cap on m arket entries. In this paper, w e exam ine the im plications that the cap has on the firm s' investm ent equilibrium policy and on social w elfare in the presence of m arket uncertainty. In contrast with previous literature, w e explicitly m odel the present externality and then let the social planner choose the cap level m axim izing w elfare. W e find that: i) if the consideration of the option value triggers investm ent at price above the social m arginal c ost of production, then it is optim al to have no cap at all; ii) otherw ise, the cap should be set on the current m arket quantity and a ban on further m arket entries should be announced. AbstractIn markets where production has adverse externalities, policy makers may wish to increase welfare by imposing a cap on market entries. In this paper, we examine the implications that the cap has on the firms' investment equilibrium policy and on social welfare in the presence of market uncertainty. In contrast with previous literature, we explicitly model the present externality and then let the social planner choose the cap level maximizing welfare. We find that: i) if the consideration of the option value triggers investment at price above the social marginal cost of production, then it is optimal to have no cap at all; ii) otherwise, the cap should be set on the current market quantity and a ban on further market entries should be announced.

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“…Stopping further market entries No cap on aggregate investment Among the other studies that have adopted the Bartolini (1993) framework, the most prominent ones are, Moretto and Vergalli (2010) and Di Corato, Moretto and Vergalli (2013).…”

Section: Optimal Policymentioning

confidence: 99%

Production Externalities and Investment Caps: a Welfare Analysis under Uncertainty

Corato

¹

,

Maoz

²

2018

SSRN Journal

Self Cite

0

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In m arkets w here production has adverse externalities, policy m akers m ay w ish to increase w elfare by im posing a cap on m arket entries. In this paper, w e exam ine the im plications that the cap has on the firm s' investm ent equilibrium policy and on social w elfare in the presence of m arket uncertainty. In contrast with previous literature, w e explicitly m odel the present externality and then let the social planner choose the cap level m axim izing w elfare. W e find that: i) if the consideration of the option value triggers investm ent at price above the social m arginal c ost of production, then it is optim al to have no cap at all; ii) otherw ise, the cap should be set on the current m arket quantity and a ban on further m arket entries should be announced.

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“…The author solves the problem numerically in a discrete time framework. Recently, in Di Corato et al (2013), forest land conversion to other uses is studied when the value of the forest's environmental services provided follow a GBM. Other works as Penttinen (2006), Yoshimoto and Shoji (1998) also support the use of GBM to model price dynamics and characterize the corresponding optimal harvesting policy numerically.…”

mentioning

confidence: 99%

The stochastic Mitra–Wan forestry model: risk neutral and risk averse cases

Piazza

¹

,

Pagnoncelli

²

2014

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We extend the classic Mitra and Wan forestry model by assuming that prices follow a geometric Brownian motion. We move one step further in the model with stochastic prices and include risk aversion in the objective function. We prove that, as in the deterministic case, the optimal program is periodic both in the risk neutral and risk averse frameworks, when the benefit function is linear. We find the optimal rotation ages in both stochastic cases and show that they may differ significantly from the deterministic rotation age. In addition, we show how the drift of the price process affects the optimal rotation age and how the degree of risk aversion shortens it. We illustrate our findings for an example of a biomass function and for different values of the model's parameters.

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Land conversion pace under uncertainty and irreversibility: too fast or too slow?

Cited by 8 publications

References 48 publications

Production externalities and investment caps: A welfare analysis under uncertainty

Production externalities and investment caps: A welfare analysis under uncertainty

Production Externalities and Investment Caps: a Welfare Analysis under Uncertainty

The stochastic Mitra–Wan forestry model: risk neutral and risk averse cases

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