Optimal Ergodic Harvesting under Ambiguity

DOI10.1137/21M1413262zbMATH Open1486.93023arXiv2104.10626OpenAlexW3154954246WikidataQ114074049 ScholiaQ114074049MaRDI QIDQ5072292FDOQ5072292

Chuhao Sun, Alexandru Hening, Asaf Cohen

Publication date: 27 April 2022

Published in: SIAM Journal on Control and Optimization (Search for Journal in Brave)

Abstract: We consider an ergodic harvesting problem with model ambiguity that arises from biology. To account for the ambiguity, the problem is constructed as a stochastic game with two players: the decision-maker (DM) chooses the `best' harvesting policy and an adverse player chooses the `worst' probability measure. The main result is establishing an optimal strategy (also referred to as a control) of the DM and showing that it is a threshold policy. The optimal threshold and the optimal payoff are obtained by solving a free-boundary problem emerging from the Hamilton--Jacobi--Bellman (HJB) equation. As part of the proof, we fix a gap that appeared in the HJB analysis of [Alvarez and Hening, {em Stochastic Process. Appl.}, 2019], a paper that analyzed the risk-neutral version of the ergodic harvesting problem. Finally, we study the dependence of the optimal threshold and the optimal payoff on the ambiguity parameter and show that if the ambiguity goes to 0, the problem converges, to the risk-neutral problem.

Full work available at URL: https://arxiv.org/abs/2104.10626

zbMATH Keywords

model uncertaintystochastic gamesergodic controloptimal harvestingsingular controlstochastic harvesting

Mathematics Subject Classification ID

Environmental economics (natural resource models, harvesting, pollution, etc.) (91B76) Stochastic games, stochastic differential games (91A15) Optimal stochastic control (93E20)

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