Real options and game theoretical approaches to real estate development projects: multiple equilibria and the implications of different tie-breaking rules

This paper contributes to a fast growing literature which introduces game theory in the analysis of real option investments in a competitive setting. Specifically, in this paper we focus on the issue of multiple equilibria and on the implications that different equilibrium selections may have for the pricing of real options and for subsequent strategic decisions. We present some theoretical results of the necessary conditions to have multiple equilibria and we show under which conditions different tie-breaking rules result in different economic decisions. We then present a numerical exercise using the in formation set obtained on a real estate development in South London. We find that risk aversion reduces option value and this reduction decreases marginally as negative externalities decrease.

Precise calculations of the existence of multiple AMOC equilibria in coupled climate models Part I: equilibrium states

This study examines criteria for the existence of two stable states of the Atlantic Meridional Overturning Circulation (AMOC) using a combination of theory and simulations from a numerical coupled atmosphere–ocean climate model. By formulating a simple collection of state parameters and their relationships, the authors reconstruct the North Atlantic Deep Water (NADW) OFF state behavior under a varying external salt-flux forcing. This part (Part I) of the paper examines the steady-state solution, which gives insight into the mechanisms that sustain the NADW OFF state in this coupled model; Part II deals with the transient behavior predicted by the evolution equation. The nonlinear behavior of the Antarctic Intermediate Water (AAIW) reverse cell is critical to the OFF state. Higher Atlantic salinity leads both to a reduced AAIW reverse cell and to a greater vertical salinity gradient in the South Atlantic. The former tends to reduce Atlantic salt export to the Southern Ocean, while the latter tends to increases it. These competing effects produce a nonlinear response of Atlantic salinity and salt export to salt forcing, and the existence of maxima in these quantities. Thus the authors obtain a natural and accurate analytical saddle-node condition for the maximal surface salt flux for which a NADW OFF state exists. By contrast, the bistability indicator proposed by De Vries and Weber does not generally work in this model. It is applicable only when the effect of the AAIW reverse cell on the Atlantic salt budget is weak.

Non-existence of competitive equilibria with dynamically inconsistent preferences

This paper shows the robust non-existence of competitive equilibria even in a simple three period representative agent economy with dynamically inconsistent preferences. We distinguish between a sophisticated and naive representative agent. Even when underlying preferences are monotone and convex, at given prices, we show by example that the induced preference of the sophisticated representative agent over choices in first-period markets is both non-convex and satiated. Even allowing for negative prices, the market-clearing allocation is not contained in the convex hull of demand. Finally, with a naive representative agent, we show that perfect foresight is incompatible with market clearing and individual optimization at given prices.

Climate determinism revisited: multiple equilibria in a complex climate model

Multiple equilibria in a coupled ocean–atmosphere–sea ice general circulation model (GCM) of an aquaplanet with many degrees of freedom are studied. Three different stable states are found for exactly the same set of parameters and external forcings: a cold state in which a polar sea ice cap extends into the midlatitudes; a warm state, which is ice free; and a completely sea ice–covered “snowball” state. Although low-order energy balance models of the climate are known to exhibit intransitivity (i.e., more than one climate state for a given set of governing equations), the results reported here are the first to demonstrate that this is a property of a complex coupled climate model with a consistent set of equations representing the 3D dynamics of the ocean and atmosphere. The coupled model notably includes atmospheric synoptic systems, large-scale circulation of the ocean, a fully active hydrological cycle, sea ice, and a seasonal cycle. There are no flux adjustments, with the system being solely forced by incoming solar radiation at the top of the atmosphere. It is demonstrated that the multiple equilibria owe their existence to the presence of meridional structure in ocean heat transport: namely, a large heat transport out of the tropics and a relatively weak high-latitude transport. The associated large midlatitude convergence of ocean heat transport leads to a preferred latitude at which the sea ice edge can rest. The mechanism operates in two very different ocean circulation regimes, suggesting that the stabilization of the large ice cap could be a robust feature of the climate system. Finally, the role of ocean heat convergence in permitting multiple equilibria is further explored in simpler models: an atmospheric GCM coupled to a slab mixed layer ocean and an energy balance model

Spectral nonlocality, absolute equilibria and Kraichnan-Leith-Batchelor phenomenology in two-dimensional turbulent energy cascades

We study the degree to which Kraichnan–Leith–Batchelor (KLB) phenomenology describes two-dimensional energy cascades in α turbulence, governed by ∂θ/∂t+J(ψ,θ)=ν∇2θ+f, where θ=(−Δ)α/2ψ is generalized vorticity, and ψ^(k)=k−αθ^(k) in Fourier space. These models differ in spectral non-locality, and include surface quasigeostrophic flow (α=1), regular two-dimensional flow (α=2) and rotating shallow flow (α=3), which is the isotropic limit of a mantle convection model. We re-examine arguments for dual inverse energy and direct enstrophy cascades, including Fjørtoft analysis, which we extend to general α, and point out their limitations. Using an α-dependent eddy-damped quasinormal Markovian (EDQNM) closure, we seek self-similar inertial range solutions and study their characteristics. Our present focus is not on coherent structures, which the EDQNM filters out, but on any self-similar and approximately Gaussian turbulent component that may exist in the flow and be described by KLB phenomenology. For this, the EDQNM is an appropriate tool. Non-local triads contribute increasingly to the energy flux as α increases. More importantly, the energy cascade is downscale in the self-similar inertial range for 2.5<α<10. At α=2.5 and α=10, the KLB spectra correspond, respectively, to enstrophy and energy equipartition, and the triad energy transfers and flux vanish identically. Eddy turnover time and strain rate arguments suggest the inverse energy cascade should obey KLB phenomenology and be self-similar for α<4. However, downscale energy flux in the EDQNM self-similar inertial range for α>2.5 leads us to predict that any inverse cascade for α≥2.5 will not exhibit KLB phenomenology, and specifically the KLB energy spectrum. Numerical simulations confirm this: the inverse cascade energy spectrum for α≥2.5 is significantly steeper than the KLB prediction, while for α<2.5 we obtain the KLB spectrum.

Pulsating equilibria: stability through migration

This paper is to present a model of spatial equilibrium using a nonlinear generalization of Markov-chain type model, and to show the dynamic stability of a unique equilibrium. Even at an equilibrium, people continue to migrate among regions as well as among agent-types, and yet their overall distribution remain unchanged. The model is also adapted to suggest a theory of traffic distribution in a city.

Phase equilibria study of systems composed of refined babassu oil, lauric acid, ethanol, and water at 303.2 K

Deacidification of vegetable oils can be performed using liquid-liquid extraction as an alternative method to the classical chemical and physical refining processes. This paper reports experimental data for systems containing refined babassu oil, lauric acid, ethanol, and water at 303.2 K with different water mass fractions in the alcoholic solvent (0, 0.0557, 0.1045, 0.2029, and 0.2972). The dilution of solvent with water reduced the distribution coefficient values, which indicates a reduction in the loss of neutral oil. The experimental data were used to adjust the NRTL equation parameters. The global deviation between the observed and the estimated compositions was 0.0085, indicating that the model can accurately predict the behavior of the compounds at different levels of solvent hydration. (C) 2011 Elsevier Ltd. All rights reserved.

Liquid-liquid equilibria for systems composed of refined soybean oil, free fatty acids, ethanol, and water at different temperatures

Soybean oil can be deacidified by liquid-liquid extraction with ethanol. In the present paper, the liquid-liquid equilibria of systems composed of refined soybean oil, commercial linoleic acid, ethanol and water were investigated at 298.2 K. The experimental data set obtained from the present study (at 298.2 K) and the results of Mohsen-Nia et al. [1] (at 303.2 K) and Rodrigues et al. [2] (at 323.2 K) were correlated by applying the non-random two liquid (NRTL) model. The results of the present study indicated that the mutual solubility of the compounds decreased with an increase in the water content of the solvent and a decrease in the temperature of the solution. Among variables, the water content of the solvent had the strongest effect on the solubility of the components. The maximum deviation and average variance between the experimental and calculated compositions were 1.60% and 0.89%, indicating that the model could accurately predict the behavior of the compounds at different temperatures and degrees of hydration. (C) 2010 Elsevier B.V. All rights reserved.

Polymethine cyanine dyes in beta-cyclodextrin solution: multiple equilibria and chemical oxidation

Absorption and fluorescence spectroscopy, electrochemical techniques, and semiempirical calculations were employed to characterize the multiple complexation equilibria between two polymethine cyanine dyes (IR-786 and Indocyanine green-ICG, 5) and beta-cyclodextrin (beta-CD, L), as well as the chemical reactivity of the complexed and uncomplexed species against the oxidizing agents hypochlorite (HC) and hydrogen peroxide (HP). IR-786 dimerization is favored with the increase in beta-CD concentration in the form of (SL)(2) complexes. In the case of ICG, free dimers (D) and SL complexes are favored. Both IR-786 and ICG react and discolor in the presence of HC and HP. For IR-786, the reaction with HP and HC proceeds with observed rate constants of 10(-3) and 0.28 s(-1) and second-order rate constants (k(2)) of similar to 10(-3) and 10(4) M(-1) s(-1), respectively. The intermediate species observed in the bleaching reactions of IR-786 and ICG were shown, by cyclic voltammetry and VIS absorption, to result from one electron oxidation. IR-786 complexed with beta-CD is protected against bleaching in the presence of HP and HC by factors of 20 and 4, respectively. This protection was not observed in ICG complexes. Superdelocalizability profile of both dyes and frontier orbital analysis indicates that beta-CD does not protect ICG from oxidation by HP or HC, whereas the 2:2 IR-786/beta-Cd complex is able to avoid the oxidation of IR-786. We concluded that the decrease in the chemical reactivity of the dyes against oxidant agents in the presence of beta-CD is due to the formation of (SL)(2) complexes. Copyright (C) 2010 John Wiley & Sons, Ltd.

Adventures of punctuated equilibria : a struggle for authority in the evolutionary sciences

The theory of ‘punctuated equilibria’ was formulated by two paleontologists, Niles Eldredge and Stephen Gould, in 1972 and has been the focus of considerable controversy within the evolutionary sciences ever since. The primary intentions of this thesis are to relate the history of punctuated equilibria and to examine how it has affected evolutionary science. Several modes of analysis have been used to illuminate the history: The sociological perspectives of Pierre Bourdieu and Bruno Latour (who see scientific debate as a ‘struggle for authority’); Rhetorical analysis of some of the key documents; Communication with practising scientists via questionnaires and correspondence; Citation Analysis. Chapter 1 gives a short summary of the history and introduces the methods and socio-philosophical perspectives used to illuminate the history. Chapters 3 and 4 examine the rhetorical process by which Eldredge and Gould constructed the ‘punctuationist revolution’. Chapters 2, 3, 5 and 6 relate the history of punctuated equilibria.