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Environmental Modeling & Assessment

, Volume 24, Issue 1, pp 49–60 | Cite as

Stochastic Shadow Pricing of Renewable Natural Resources

  • Arnaud Z. DragicevicEmail author
Article
  • 125 Downloads

Abstract

By means of stochastic optimal control, this paper aims at studying the shadow pricing of renewable natural resources in uncertainty. Two cases are considered, respectively centralized and decentralized control processes. The decentralized control is in the form of a stochastic control of the state vector distributed among several agents. In both cases, the optimal control path minimizing the cost function, which is a decreasing function of time, corresponds to the real option valuation. The latter is a cost-effective optional investment in the resource stock preservation in uncertainty. The results obtained from numerical simulations show coherence with those encountered in the literature on option pricing.

Keywords

Bioeconomics Renewable natural resources Stochastic optimal control Shadow pricing Real options 

Notes

Acknowledgments

The author would like to thank Luc Doyen (CNRS, University of Bordeaux), Shandelle Henson (Andrews University), and Pierre Lasserre (CIREQ, University of Québec at Montréal) for their valuable comments and suggestions on this work. He is also grateful to the anonymous referees and to the editor for their thorough comments and suggestions, which significantly contributed to improving the quality of the paper.

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Copyright information

© Springer International Publishing AG, part of Springer Nature 2018

Authors and Affiliations

  1. 1.IRSTEA — The Center of Clermont-FerrandAubièreFrance
  2. 2.AgroParisTech, INRA, IRSTEAUniversité Clermont Auvergne, VetAgro Sup [UMR Territoires]AubièreFrance
  3. 3.Department of EconomicsIstanbul Technical University (İTÜ)IstanbulTurkey

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