This week's speaker is Neha Deopa , PhD candidate in International Economics, giving a talk entitled
Brave New World: Firm Decisions under Catastrophe Risk
Abstract: Ecological systems can often undergo regime shifts. This paper introduces a framework to capture these changes through an increase in dynamic risk. We model the renewable resource growth by means of a stochastic process where risk is increasingly affected by the firm’s extraction policy. We examine the implications of such ecological risk for a monopolist firm whose objective is to detect this change in real time as quickly as possible after it occurs and find the appropriate “optimal” harvesting policy that maximizes its present value of profits.
For questions regarding the Brown Bag Lunch please send an e-mail to Xiaojing Zhou.