Technological change in water use : a mean-field game approach to optimal investment timing

The need for clean water is expected to substantially increase while further reductions of water availability in sufficient quantity and quality are projected owing to climate change and anthropogenic activities. Accordingly, the debate on water security has recently intensi fied and reached the int...

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Main Authors: Bouveret, Géraldine, Dumitrescu, Roxana, Tankov, Peter
Other Authors: School of Physical and Mathematical Sciences
Format: Article
Language:English
Published: 2022
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Online Access:https://hdl.handle.net/10356/155005
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Institution: Nanyang Technological University
Language: English
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spelling sg-ntu-dr.10356-1550052023-02-28T19:35:23Z Technological change in water use : a mean-field game approach to optimal investment timing Bouveret, Géraldine Dumitrescu, Roxana Tankov, Peter School of Physical and Mathematical Sciences Science::Mathematics Mean-Field Games Water Conservation Technology Investment The need for clean water is expected to substantially increase while further reductions of water availability in sufficient quantity and quality are projected owing to climate change and anthropogenic activities. Accordingly, the debate on water security has recently intensi fied and reached the intergovernmental arena. Industry is, in particular, one of the largest (non-consumptive) water users, accountable for massive toxic wastewater discharges and facing stringent and costly environmental oversight. However, the management of reservoirs is intricate and operational research must be further expanded to design tools that enhance water security while improving operators' profi tability. We therefore consider a game-theoretic framework to study the strategies adopted by a large group of similar producers sharing a water reservoir for their manufacturing activities. Each operator faces random demand for its outputs and chooses the optimal time to invest in a technology that ends its reliance on the reservoir. This technology introduces cost saving opportunities for the operator and benefi ts for the environment. Each producer therefore solves a so-called optimal stopping problem, and all problems are coupled through the reservoir level. We formulate the problem of finding a Nash equilibrium as a mean-fi eld game (MFG) of optimal stopping. We then apply the model to the paper milling industry, an extensive water user facing a tightening of environmental regulations. This paper provides fresh insights into how to rethink the problem of technological change and water management, by offering an innovative application of operational research that builds on recent mathematical developments made in MFG theory. Published version 2022-02-14T02:02:19Z 2022-02-14T02:02:19Z 2022 Journal Article Bouveret, G., Dumitrescu, R. & Tankov, P. (2022). Technological change in water use : a mean-field game approach to optimal investment timing. Operations Research Perspectives, 9, 100225-. https://dx.doi.org/10.1016/j.orp.2022.100225 2214-7160 https://hdl.handle.net/10356/155005 10.1016/j.orp.2022.100225 9 100225 en Operations Research Perspectives © 2022 The Author(s). Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/). application/pdf application/pdf
institution Nanyang Technological University
building NTU Library
continent Asia
country Singapore
Singapore
content_provider NTU Library
collection DR-NTU
language English
topic Science::Mathematics
Mean-Field Games
Water Conservation
Technology Investment
spellingShingle Science::Mathematics
Mean-Field Games
Water Conservation
Technology Investment
Bouveret, Géraldine
Dumitrescu, Roxana
Tankov, Peter
Technological change in water use : a mean-field game approach to optimal investment timing
description The need for clean water is expected to substantially increase while further reductions of water availability in sufficient quantity and quality are projected owing to climate change and anthropogenic activities. Accordingly, the debate on water security has recently intensi fied and reached the intergovernmental arena. Industry is, in particular, one of the largest (non-consumptive) water users, accountable for massive toxic wastewater discharges and facing stringent and costly environmental oversight. However, the management of reservoirs is intricate and operational research must be further expanded to design tools that enhance water security while improving operators' profi tability. We therefore consider a game-theoretic framework to study the strategies adopted by a large group of similar producers sharing a water reservoir for their manufacturing activities. Each operator faces random demand for its outputs and chooses the optimal time to invest in a technology that ends its reliance on the reservoir. This technology introduces cost saving opportunities for the operator and benefi ts for the environment. Each producer therefore solves a so-called optimal stopping problem, and all problems are coupled through the reservoir level. We formulate the problem of finding a Nash equilibrium as a mean-fi eld game (MFG) of optimal stopping. We then apply the model to the paper milling industry, an extensive water user facing a tightening of environmental regulations. This paper provides fresh insights into how to rethink the problem of technological change and water management, by offering an innovative application of operational research that builds on recent mathematical developments made in MFG theory.
author2 School of Physical and Mathematical Sciences
author_facet School of Physical and Mathematical Sciences
Bouveret, Géraldine
Dumitrescu, Roxana
Tankov, Peter
format Article
author Bouveret, Géraldine
Dumitrescu, Roxana
Tankov, Peter
author_sort Bouveret, Géraldine
title Technological change in water use : a mean-field game approach to optimal investment timing
title_short Technological change in water use : a mean-field game approach to optimal investment timing
title_full Technological change in water use : a mean-field game approach to optimal investment timing
title_fullStr Technological change in water use : a mean-field game approach to optimal investment timing
title_full_unstemmed Technological change in water use : a mean-field game approach to optimal investment timing
title_sort technological change in water use : a mean-field game approach to optimal investment timing
publishDate 2022
url https://hdl.handle.net/10356/155005
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