The next research seminars in the ISEG Research Seminars'25 cycle will take place on 14 and 15 May, from 13.00 to 14.00, in ISEG's Lecture Theatre 3 (Quelhas, 4th Floor).
For the seminar on 14 May, the keynote speaker will be Professor Carlos Oliveira, who will present a paper on "Investment in two alternative projects: combining optimal switching with the exit option". For the seminar on the 15th, Professor Brian Knight, from Brown University (USA), will present the research paper "Policing for profit? Evidence from post-Ferguson reforms in Missouri". The abstracts of both papers can be found below.
The 2nd Semester Research seminars run weekly until June 4, featuring professors from ISEG and other national and international schools. Read more HERE.
Free admission, subject to room capacity.
Abstracts
"Investment in two alternative projects: combining optimal switching with the exit option" (co-authored with Cláudia Nunes and Igor Kravchenko)
We use an analytical framework to examine a firm's investment and switching strategy under uncertainty. The context is the possibility to launch and operate two distinct projects, one at a time, with exposure to a stochastic exogenous price. We allow for multiple switches between the two projects, along with abandonment options from each. These possibilities fundamentally influence the operational strategy. We show that under some conditions, a dichotomous waiting region may arise at the investment stage. In this case we have an inaction region, for a range of prices in a certain bounded interval, where the firm does not invest and waits to have more information about the price evolution. This region vanishes for a high level of uncertainty. Additionally, the firm may operate with a negative instantaneous profit. We prove that investment in this region is never optimal. Numerical examples enable comparative statics, while extension to allow for time-to-build is included.
"Policing for profit? Evidence from post-Ferguson reforms in Missouri"
In the United States, fines and fees from policing can be a major source of government revenue. Critics argue this incentivizes law-enforcement to maximize collections rather than safety. We investigate this issue in the context of a series of reforms in Missouri designed to curb policing for profit after the 2014 shooting of Michael Brown in Ferguson. In the time series, we document large aggregate declines in per-capita collections and traffic stops immediately after the shooting. The aggregate decline is concentrated in municipalities raising significant revenue from collections at baseline and in locations with the motive and opportunity to engage in policing for profit. Examining specific reforms, we find that a 20 percent cap on revenue from policing introduced after Ferguson can explain as much as half of the aggregate decline. Taken together, our findings highlight both how revenue motives can distort the criminal justice system, and how simple reforms that realign real-world incentives can change police behavior.