International Review of Environmental and Resource Economics > Vol 18 > Issue 4

The Economics of Tipping Points: Some Recent Modeling and Experimental Advances

Chuan-Zhong Li, Department of Economics, Uppsala University, and The Beijer Institute, The Royal Swedish Academy of Sciences, Sweden, Anne-Sophie Crépin, The Beijer Institute, The Royal Swedish Academy of Sciences, and Stockholm Resilience Centre, Stockholm University, Sweden, asc@beijer.kva.se , Therese Lindahl, The Beijer Institute, The Royal Swedish Academy of Sciences, and Stockholm Resilience Centre, Stockholm University, Sweden
 
Suggested Citation
Chuan-Zhong Li, Anne-Sophie Crépin and Therese Lindahl (2024), "The Economics of Tipping Points: Some Recent Modeling and Experimental Advances", International Review of Environmental and Resource Economics: Vol. 18: No. 4, pp 385-442. http://dx.doi.org/10.1561/101.00000167

Publication Date: 11 Jul 2024
© 2024 C.-Z. Li, A.-S. Crépin and T. Lindahl
 
Subjects
Environmental economics,  Economic theory,  Behavioral economics,  Experimental economics,  Imperfect information,  Complexity,  Hysteresis,  Game theory,  Uncertainty,  Collective action,  Climate Change,  Fisheries,  Water,  Forestry
 
Keywords
JEL Codes: C92D81Q01Q28Q54Q56Q57
Climate changeexperimental economicshazard rate modelingnatural resourcesregime shiftstipping points
 

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Open Access

This is published under the terms of CC-BY.

In this article:
1 Introduction 
2 Non-Convexities and Deterministic Tipping Points 
3 Hazard Rate Models and Uncertain Tipping Points 
4 Integrated Assessment Models and Joint Tipping Points 
5 Using Controlled Experiments to Analyze Behavior in Games with Tipping Points 
6 Concluding Remarks and Future Avenues 
References 

Abstract

This paper provides a review of the economics of tipping points in natural resources and climate change economics, examining recent advances in theoretical modeling and controlled experiments. We begin with the non-convexity models as a theoretical foundation, provide a typology of the resulting deterministic tipping points, and discuss their implications for management. Then, we focus on hazard rate modeling for optimal resource management with stochastic and unknown tipping points. We discuss Bayesian learning, strategic behavior among agents, and the advancement in integrated assessment modeling with multiple and interacting tipping points. Finally, we examine the new \hbox{contributions} of experimental economics to understanding decision-making processes in the presence of tipping points. The paper concludes by highlighting the main advances in the literature and outlining future research directions, ultimately aiming to encourage further investigation and the development of innovative tools to address global challenges.

DOI:10.1561/101.00000167