We consider economic growth in the presence of a minimal survival consumption level when preferences are lexicographic giving highest priority to the survival of the current and then all future generations. Knowledge of production is incomplete so future output made possible by current saving must be estimated. The resulting capital accumulation path is compared with the inter–temporally optima...

This paper uses a real options approach to examine the impact of ramping rate restrictions imposed on hydro operations to protect aquatic ecosystems. We consider the effect on hydro plant value in order to inform policy decisions. A novelty of the paper is in examining the optimal operation of a prototype hydro power plant with electricity prices modelled as a regime switching process. We show ...

Habit utility has been the focus of a large and growing body of literature in financial economics. This study investigates ways of accurately and efficiently solving the Campbell and Cochrane [1999. Journal of Political Economy 107, 205–251] external habit model. Solutions for this model based on a grid of values for the state variable are shown to converge as the grid becomes increasingly fine...

Using techniques from evolutionary game theory, we analyze potential games with continuous player sets, a class of games which includes a general model of network congestion as a special case. We concisely characterize both the complete set of Nash equilibria and the set of equilibria which are robust against small disturbances of aggregate behavior. We provide a strong evolutionary justificati...

The current extensive literature on irreversible investment decisions makes the assumption of constant interest rate. In this paper we study the impact of interest rate and revenue variability on the decision to carry out an irreversible investment project. Given the generality of the considered valuation problem, we first provide a thorough mathematical characterization of the problem and deve...

This paper extends Merton’s continuous time (instantaneous) mean-variance analysis and the mutual fund separation theory. Given the existence of a Markovian state price density process, the optimal portfolios from concave utility maximization are instantaneously mean-variance efficient independent of the concave utility function’s form. The Capital Asset Pricing Model holds with the market port...

We consider the problem of when to deliver the contract payoff, in a continuoustime Principal-Agent setting, in the presence of moral hazard and/or adverse selection. The principal can design contracts of a simple form that induce the agent to ask for the payoff at the time of principal’s choosing. The optimal time of payment depends on the agent’s and the principal’s outside options. Examples ...

This paper studies an incompletely informed regulator's problem of inducing a firm producing durable pollution to adopt a socially optimal pollution storage technology. We construct a sparse, yet flexible, theoretical model that can be applied directly to concrete situations as it is stated explicitly in terms of statistical parameters. Next, we show the existence of an optimal regulatory contr...

This paper investigates the current important issue in Taiwan that the impact of foreign workers on the rising unemployment rate by constructing a dynamic intertemporal general equilibrium model. The results show that foreign workers rob jobs from the local unskilled labor and raise the unemployment rates during the past decade. However, extending the time frame to a longer term, an increasing ...

This paper investigates the optimal management of a firm faced with a long-term liability that occurs at a random date. Three issues are analysed: the optimal dividend policy; optimal expenditure on safety to delay the occurrence of the liability; and the optimal liquidation date of the firm. An owner faced with dynamic unlimited liability never liquidates and therefore accumulates capital to t...