13h30 - 13h55
An Options Pricing Approach to Clean Development Mechanism Projects
In this paper, we model the dynamics of investments in a unilateral, one revenue stream CDM (Clean Development Mechanism) project with the real options method, that takes into account the irreversibility and ongoing uncertainty pertaining to the process.
13h55 - 14h20
Dynamic Game of Emission Control; Contrast between Developed and Developing Countries
A two-player dynamic game of emission control is presented. Developed country is vulnerable to environment over an infinite horizon, while developing country has some priorities and only after reaching to a target takes into account environmental issues. Non-Cooperative and cooperative outcomes are presented and conditions for stabilizing cooperation is studied.
14h20 - 14h45
Time Consistent Pareto Solutions in Common Access Resource Games with Asymmetric Players
We study a set of dynamic programming equations characterizing time consistent strategies for N-player cooperative differential games where the agents discount the future by using different discount rates of time preference. Effects of heterogeneous discounting are explored in common access natural resource games.
14h45 - 15h10
Splitting an Uncertain (Natural) Capital
Most natural commons are subject to discontinuities and threshold effects, so their gradual depletion may result in a sudden irreversible loss of the associated ecological services. Yet, it is often impossible to locate these thresholds with certainty. We analyze this context using a variant of the divide-the-dollar game, in which the amount to be split among players follows a discrete or multimodal probability distribution. ‘Cautious equilibria’ - where agents collectively behave as if the worst-case scenario were certain - are found to coexist with ‘dangerous equilibria’ - where overall demand for ecological services might lead to their collapse - and ‘dreadful equilibria’ - where agents collectively request so much natural capital that a collapse of ecological services is certain, even if all agents are risk averse. Communication/cooperation among agents, however, which raises the possibility of coordinated group deviations, would eliminate dreadful equilibria and reduce the occurrence of dangerous equilibria, while cautious equilibria are robust to such deviations. A direct corollary is that dangerous equilibria are Pareto-dominated by any cautious equilibrium in which all agents claim less natural capital. These results shed light on the management of common-pool resources, international climate change negotiations, and the implementation of precautionary policies.