The parsimony of economic theory provides general insights into an otherwise complex world. However, the most straightforward organizing principles from theory have not often taken hold in environmental policy or in the decentralized climate policy regime that is unfolding. One reason is inadequate recognition of a variety of institutions. This paper addresses three ways the standard model may ...

In this article we propose the use of Data Envelopment Analysis (DEA) measures of efficiency, under constant returns to scale and input equal to unity, in the analysis of multidimensional nonnegative responses in the design of experiments. The approach agrees with the standard Analysis of Variance (Covariance) for univariate responses and simplifies the statistical analysis in the multivariate ...

This study uses the concept of shadow prices for measuring the impacts of climate change. By estimating a restricted profit function rather than a cost or a production function the explanatory power of the model is increased because of an endogenous output structure. Using low aggregated panel data on Western German farmers, the results imply that the agricultural production process is signific...

The present paper accomplishes a major step towards a reconciliation of two conflicting approaches in mathematical finance: on the one hand, the mainstream approach based on the notion of no arbitrage (Black, Merton & Scholes); and on the other hand, the consideration of non-semimartingale price processes, the archetype of which being fractional Brownian motion (Mandelbrot). Imposing (arbitrari...

Many production activities generate undesirable byproducts in conjunction with the desirable outputs they produce. The present study uses an output distance function approach and its duality with the revenue function to estimate the marginal abatement cost of CO2 emissions from a sample of thermal plants in India. Two sets of exercises have been undertaken. The marginal abatement cost is first ...

We study the optimal transition from fossil fuels to renewable energy in a neoclassical growth economy with endogenous technological progress in energy production. Technological innovations maintain a fairly constant cost of fossil fuel energy even as increased exploitation raises mining costs. Nevertheless, the economy transitions to renewable energy once energy costs escalate after about 80% ...

This working note provides a basic overview of discounting in the context of climate change policy. After defining the social discount factor and social discount rate in terms of shadow prices (section 2), and noting the limitations of cost-benefit analysis for climate change (section 3), the determination of efficient social discount rates is discussed given: the impact of uncertainty about fu...

Article history: Received 8 May 2006 Received in revised form 10May 2007 Accepted 1 June 2007 Available online 13 July 2007 Theproduction efficiency and shadowprices of three environmental outputs (BOD,COD, andSS) of 63 household-level paper-recycling units, from a recycling craft village in Vietnam, are assessed A two-stage procedure, linear programming and stochastic estimation, is used to es...

The present study attempts to estimate the shadow price of unextracted groundwater in the Vozvozi aquifer. In the context of this study, we model the production function of vertically integrated agricultural firms in terms of an input-oriented distance function with multiple inputs. Duality theory is employed in order to extract information regarding the in situ shadow price of groundwater. Thi...

Manyeconomicmodels andoptimizationproblemsgenerate (endogenous) shadow prices—alias dual variables or Lagrange multipliers. Frequently the “slopes” of resulting price curves—that is, multiplier derivatives—are of great interest. These objects relate to the Jacobian of the optimality conditions. That particular matrix often has block structure. So, we derive explicit formulas for the inverse of ...