Keywords: conservation, endogenous events, exogenous events, event uncertainty, irreversibility, optimal resource management
Resource exploitation under environmental uncertainty
Optimal resource management is considered, with a special emphasis on the possible occurrence of a catastrophic environmental event, whose occurrence conditions arc subject to uncertainty. The events are classified according to the extent to which the damage they inflict is reversible, and are characterised as exogenous or endogenous. The implications of this classification on the ensuing optimal policies are analysed. The framework presented unifies the analysis of the plethora of events considered, relating their optimal state processes to the particular class to which the corresponding event belongs. We find that endogenous events give rise to equilibrium intervals and always entail more conservation. In contrast, exogenous events entail isolated equilibrium levels, and conservation is ensured only if the event is reversible.