Working paper

Catastrophes, delays, and learning

Matti Liski, and François Salanié

Abstract

How to plan for catastrophes that may be under way? In a simple but general model of experimentation, a decision-maker chooses a flow variable contributing to a stock that may trigger a catastrophe at each untried level. Once triggered, the catastrophe itself occurs only after a stochastic delay. Consequently, the rhythm of past experimentations determines the arrival of information. This has strong implications for policies in situations where the planner inherits a history of experiments, like climate change and pandemic crisis. The structure encompasses canonical approaches in the literature.

Keywords

catastrophes, experimentation, delays;

JEL codes

  • C61: Optimization Techniques • Programming Models • Dynamic Analysis
  • D81: Criteria for Decision-Making under Risk and Uncertainty
  • Q54: Climate • Natural Disasters • Global Warming

Reference

Matti Liski, and François Salanié, Catastrophes, delays, and learning, TSE Working Paper, n. 20-1148, September 2020.

See also

Published in

TSE Working Paper, n. 20-1148, September 2020