Doctoral Dissertations
Date of Award
5-2024
Degree Type
Dissertation
Degree Name
Doctor of Philosophy
Major
Economics
Major Professor
Charles B. Sims
Committee Members
J. Scott Holladay, Christian A. Vossler, Benjamin P. Leard
Abstract
The first chapter of this dissertation analyzes how policy uncertainty affects electric utility investment rates. Policy can either positively or negatively impact firm profits, as seen in the difference between subsidies and taxes. Using a real option theoretical model, I show how uncertainty over these two types of policies can have positive or negative impacts on investment rates. Empirical results using investment data for electric utilities provide evidence in support of differential effects of uncertainty. I find a positive effect of policy uncertainty on electric utility investment rates using my preferred measure of policy uncertainty. This suggests that policies applicable to electric utilities negatively impact their profits, such as taxes.
The second chapter experimentally tests whether individuals behave according to real option theory when considering low-probability high-severity outcomes. Individuals often make important decisions under uncertainty with severe outcomes, such as choosing medical treatments. I find that university student research participants behave according to directional predictions real option theory in low-probability high-severity contexts. However, participants’ willingness to pay for information deviates from real option theory predictions. In these contexts, such as a low probability lifesaving medical procedure, individuals would wait too long or gather too much information than real option theory predicts. In the context of public policy, these types of scenarios would cause voter preferences to deviate from the optimal timing of policy according to real option theory.
The third chapter examines whether power plants respond to the Clean Air Interstate Rule and Cross State Air Pollution Rule by switching fuel types, retiring polluting boilers, or installing new pollution control technology. The results suggest that recent regulations achieved emissions reductions by changing the composition of pollution control technology without causing boiler retirements. I find evidence that plant managers switch fuel type in response to sulfur dioxide regulation. I find that boilers are more likely to install dry type technologies and selective noncatalytic reduction technology in response to regulation. These two categories of technologies can be classified as relatively cheap and less effective than their counterparts.
Recommended Citation
Swartzentruber, Ryan, "Three Essays in Environmental Economics. " PhD diss., University of Tennessee, 2024.
https://trace.tennessee.edu/utk_graddiss/10171