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2211.03591.pdf

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http://eprints.org/relation/isVersionOf https://pure.iiasa.ac.at/id/document/104714 http://eprints.org/relation/isVolatileVersionOf https://pure.iiasa.ac.at/id/document/104714 http://eprints.org/relation/issmallThumbnailVersionOf https://pure.iiasa.ac.at/id/document/104714 104720 1 318902 document 104720 indexcodes.txt text/x-c++ 42498be48ff358ae64e4efea44a37f54 MD5 6455 2024-01-29 12:12:05 https://pure.iiasa.ac.at/id/eprint/19441/6/indexcodes.txt 19441 6 6 text/x-c++ other Generate index codes conversion from text to indexcodes en public

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http://eprints.org/relation/isVersionOf https://pure.iiasa.ac.at/id/document/104714 http://eprints.org/relation/isVolatileVersionOf https://pure.iiasa.ac.at/id/document/104714 http://eprints.org/relation/isIndexCodesVersionOf https://pure.iiasa.ac.at/id/document/104714 archive 353 disk0/00/01/94/41 2024-01-29 12:03:39 2024-01-29 12:03:39 2024-01-29 12:03:39 article show 2 Khabarov N. 1850 0000-0001-5372-4668 Smirnov A. 98121 0000-0003-1765-0782 Obersteiner M. 7255 0000-0001-6981-2769 submitted ASA EM BNR AFE Shadow prices are well understood and are widely used in economic applications. However, there are limits to where shadow prices can be applied assuming their natural interpretation and the fact that they reflect the first order optimality conditions (FOC). In this paper, we present a simple ad-hoc example demonstrating that marginal cost associated with exercising an optimal control may exceed the respective cost estimated from a ratio of shadow prices. Moreover, such cost estimation through shadow prices is arbitrary and depends on a particular (mathematically equivalent) formulation of the optimization problem. These facts render a ratio of shadow prices irrelevant to estimation of optimal marginal cost. The provided illustrative optimization problem links to a similar approach of calculating social cost of carbon (SCC) in the widely used dynamic integrated model of climate and the economy (DICE). 2022-11 published https://arxiv.org/abs/2310.12807 151 288 219 public arXiv FALSE no info:eu-repo/semantics/article