Optimal Control of Pollutants with Delayed Stock Accumulation
CER-ETH - Center of Economic Research at ETH Zurich, Working Paper No. 08/91
25 Pages Posted: 29 Jul 2008
Date Written: July 1, 2008
We study the optimal control of a pollutant that accumulates with a delay. We find that optimal paths are, in general, non-monotonic and oscillatory, but monotonic if the objective function is additively separable. Hence, using additively separable objective functions as an approximation to a general objective function may be a misspecification. With a numerical example we illustrate that an additively separable approximation performs considerably worse in delayed compared to instantaneous stock accumulation.
Keywords: additively separable objective, approximated objective, delayed optimal control, optimal pollution control
JEL Classification: Q50, C61
Suggested Citation: Suggested Citation