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Adaptation to catastrophic events with two layers uncertainty: Central planner perspective
Discussion paper / Internet publication
 
ID 4376741
Author(s) Bondarev, Anton; Krysiak, Frank C.
Author(s) at UniBasel Bondarev, Anton
Krysiak, Frank Christian
Year 2018
Month and day 02-16
Title Adaptation to catastrophic events with two layers uncertainty: Central planner perspective
Series title WWZ Working Papers
Volume 2018
Number 10
Pages 33
Publisher / Institution WWZ, University of Basel
Keywords climate change adaptation; catastrophic events; model uncertainty; Bayesian updating; Dirichlet mixtures
Abstract We study the optimal adaptation to extreme climate events by the central gov- ernment in a setup where events are dynamically uncertain and the government does not know the true probabilities of events. We analyze dierent policy decision rules minimizing expected welfare losses for sites with dierent expected damages from the catastrophic event. We nd out under which conditions it is optimal to wait before implementation of a prevention measures to obtain more information about the underlying probabilistic process. This waiting time crucially depends on the information set of the planner and the implemented learning procedure. We study dierent learning procedures on behalf of the planner ranging from simple perfect learning to two-layers Bayesian updating in the form of Dirichlet mixture processes.
edoc-URL https://edoc.unibas.ch/61489/
Full Text on edoc Available
 
   

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