9319808 Pindyck This project consists of two parts. The purpose of the first is to extend the investigator's recent work on irreversible investment decisions under uncertainty. The second part involves applying the ideas and methods developed in the first part to the analysis and design of environmental policy in the presence of irreversibilities. Models will be developed that combine both economic uncertainty and ecological uncertainty with two kinds of irreversibilities that are often inherent in the adoption of an environmental policy. The first kind of irreversibility is the sunk cost to society resulting from the environmental regulations themselves. The second is the sunk benefit in the form of avoided environmental degradation that also results from the regulations. The goal of this activity is to apply the models to the analysis of policies directed at the problem of global warming. ***
