UBC Theses and Dissertations
Three essays on crisis management under uncertainty : drought, climate change, and pandemic Siami, Navid
This dissertation is a collection of three essays that studies decision-making under uncertainty in a crisis context. The first essay examines the rational behavior of decision-making authority in providing water to a municipality facing drought. The forward-looking decision-making authority optimally chooses the size and time of building a desalination plant. The essay formulates the question as a dynamic programming problem with uncertainty in rainfall. By solving the problem numerically, the essay studies the behavior of the model through simulation. The correlation patterns produced by the simulations from the model are consistent with the correlation patterns observed in real-world data. The second essay examines the interactions of three different green innovations to combat climate change. It revisits Jevons’ paradox, which states that if demand is sufficiently elastic, an improvement in the fuel efficiency (FE) increases the flow of fuel consumption and, in the modern context of climate change, the flow of carbon emissions. An improvement in fuel efficiency also increases the stock of total carbon emissions. However, with carbon capture and storage (CCS), the effect on the total carbon emissions stock depends on the time pattern of emissions. Strong enough innovation in CCS reverses the paradoxical impact of FE. A similar (but reversed) logic holds for innovation in clean energy (CE) backstops. CE innovations reduce the stock of total carbon emissions. However, the improving CCS technology reduces the benefits of clean energy innovation, and strong enough, CCS reverses their beneficial impact. The third essay examines the interaction of re-election pressure and asymmetric information in politicians’ decision-making. Politicians and voters update their beliefs in a Bayesian way. Politicians have asymmetric information and seek re-election. The closer the election, the more the incumbent politicians refrain from implementing the welfare-maximizing policy and deviate towards their voting base’s bias. The theoretical model’s implications are tested with a dataset on gubernatorial decisions during the national Covid-19 crisis. A difference-in-difference empirical strategy shows that the governors who had an upcoming election in 2020 were biased towards their base. The Democrat and Republican governors who did not face a forthcoming election behaved statistically similar to each other.
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