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Quickest Detection of Ecological Regimes for Natural Resource Management

Author

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  • Neha Deopa

    (University of Exeter Business School)

  • Daniele Rinaldo

    (University of Exeter Business School)

Abstract

We study the stochastic dynamics of natural resources under the threat of ecological regime shifts. We establish a Pareto optimal framework of regime shift detection under uncertainty that minimizes the delay with which economic agents become aware of the shift. We integrate ecosystem surveillance in the formation of optimal resource extraction policies. We fully solve the case of a profit-maximizing monopolist, study its response to regime shift detection and show the generality of our framework by extending our results to other decision makers and functional forms. We apply our framework to the case of the Cantareira water reservoir in São Paulo, Brazil, and study the events that led to its depletion and the consequent water supply crisis.

Suggested Citation

  • Neha Deopa & Daniele Rinaldo, 2024. "Quickest Detection of Ecological Regimes for Natural Resource Management," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(5), pages 1327-1366, May.
    • Handle: RePEc:kap:enreec:v:87:y:2024:i:5:d:10.1007_s10640-024-00868-9
    DOI: 10.1007/s10640-024-00868-9
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    References listed on IDEAS

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    More about this item

    Keywords

    Regime shifts; Natural resources; Quickest detection; Uncertainty;
    All these keywords.

    JEL classification:

    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly

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