Date: Thursday, October 06, 2011
Location: 3088 East Hall (3:00 PM to 4:00 PM)
Title: Optimal Production Policy under the Carbon Emission Market
Abstract: The aim of this paper is to address the effect of the carbon emission market on the production policy of the emitting production firms. We investigate this effect in the cases where there is no large carbon producer, where there is a large producer who can not affect the risk premia, and where there is a large producer who can change the risk premia by its production. We ignore any possible investment of the production firm in pollution reducing technologies. We formulate optimal production policy by a stochastic optimization problem. Then, we show that the market reduces the optimal production policy of the small producer and the large producer who does not affect the risk premia of the market. However, dependent on the way the large producer activities change the market risk premia, the large producer can optimally produce more than what she used to do before the existence
of the emission market.
Speaker: Arash Fahim
Institution: University of Michigan
Event Organizer: Erhan Bayraktar erhan@umich.edu
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