Quickest Detection of Ecological Regimes for Natural Resource Management


We study the stochastic dynamics of natural resources under the threat of ecological regime shifts. We establish a Pareto optimal framework of regime shift detection under uncertainty that minimizes the delay with which economic agents become aware of the shift. We integrate ecosystem surveillance in the formation of optimal resource extraction policies. We fully solve the case of a profit-maximizing monopolist, study its response to regime shift detection and show the generality of our framework by extending our results to other decision makers and functional forms. We apply our framework to the case of the Cantareira water reservoir in Sao Paulo, Brazil, and study the events that led to its depletion and the consequent water supply crisis.

An earlier version of this paper has been circulated under the title “Scenes from a Monopoly. Renewable Resources and Quickest Detection of Regime Shifts”.
Neha Deopa