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An assessment of the empirical magnitude of option values for environment goods

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  • Catherine Kling

Abstract

This paper provides an empirical assessment of the magnitude of option values relative to expected surplus using a model presented by Larson and Flacco (1992). Option values and option prices are computed for both simulated data sets and actual estimates of recreation demands. Results indicate that option values engendered by price and income uncertainty are generally quite a small percent of expected surplus. Copyright Kluwer Academic Publishers 1993

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File URL: http://hdl.handle.net/10.1007/BF00310249
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Bibliographic Info

Article provided by European Association of Environmental and Resource Economists in its journal Environmental & Resource Economics.

Volume (Year): 3 (1993)
Issue (Month): 5 (October)
Pages: 471-485

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Handle: RePEc:kap:enreec:v:3:y:1993:i:5:p:471-485

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Web page: http://www.springerlink.com/link.asp?id=100263

Related research

Keywords: Option value; cost-benefit analysis under uncertainty; recreation demand;

References

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  1. Trudy Ann Cameron & Jeffrey Englin, 1991. "Cost-Benefit Analysis for Non-Market Resources: A Utility-Theoretic Empirical Model Incorporating Demand Uncertainty," UCLA Economics Working Papers 627, UCLA Department of Economics.
  2. David S. Brookshire & Larry S. Eubanks & Alan Randall, 1983. "Estimating Option Prices and Existence Values for Wildlife Resources," Land Economics, University of Wisconsin Press, vol. 59(1), pages 1-15.
  3. Edwards, Steven F., 1988. "Option prices for groundwater protection," Journal of Environmental Economics and Management, Elsevier, vol. 15(4), pages 475-487, December.
  4. Larson, Douglas M. & Flacco, Paul R., 1992. "Measuring option prices from market behavior," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 178-198, March.
  5. Greenley, Douglas A & Walsh, Richard G & Young, Robert A, 1981. "Option Value: Empirical Evidence from a Case Study of Recreation and Water Quality," The Quarterly Journal of Economics, MIT Press, vol. 96(4), pages 657-73, November.
  6. Desvousges, William H. & Smith, V. Kerry & Fisher, Ann, 1987. "Option price estimates for water quality improvements: A contingent valuation study for the monongahela river," Journal of Environmental Economics and Management, Elsevier, vol. 14(3), pages 248-267, September.
  7. Schmalensee, Richard, 1972. "Option Demand and Consumer's Surplus: Valuing Price Changes under Uncertainty," American Economic Review, American Economic Association, vol. 62(5), pages 813-24, December.
  8. Cicchetti, Charles J & Freeman, A Myrick, III, 1971. "Option Demand and Consumer Surplus: Further Comment," The Quarterly Journal of Economics, MIT Press, vol. 85(3), pages 528-39, August.
  9. Smith, V. Kerry, 1987. "Uncertainty, benefit-cost analysis, and the treatment of option value," Journal of Environmental Economics and Management, Elsevier, vol. 14(3), pages 283-292, September.
  10. Richard C. Bishop, 1982. "Option Value: An Exposition and Extension," Land Economics, University of Wisconsin Press, vol. 58(1), pages 1-15.
  11. Smith, V. Kerry & Desvousges, William H. & Fisher, Ann, 1983. "Estimates of the option values for water quality improvements," Economics Letters, Elsevier, vol. 13(1), pages 81-86.
  12. Creel, Michael D. & Loomis, John B., 1992. "Modeling hunting demand in the presence of a bag limit, with tests of alternative specifications," Journal of Environmental Economics and Management, Elsevier, vol. 22(2), pages 99-113, March.
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