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Uncertainty and the Cost of Reversal

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  • Giovanni Immordino

Abstract

For standard irreversibility theory the prospect of acquiring better information in the future should induce more flexible decisions: the “irreversibility effect”. This result relies on the definition of an irreversible position as one that would be technically or economically impossible to reverse. In practice, many positions can be reversed at an affordable cost. In this case an increase in informativeness alone is not enough to bias decisions in favour of more flexibility. We look for restrictions on decision sets, information structures and preferences that make possible to study the effect of information on flexibility. Copyright Springer Science + Business Media, Inc. 2005

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  • Giovanni Immordino, 2005. "Uncertainty and the Cost of Reversal," The Geneva Papers on Risk and Insurance Theory, Springer;International Association for the Study of Insurance Economics (The Geneva Association), vol. 30(2), pages 119-128, December.
    • Handle: RePEc:kap:geneva:v:30:y:2005:i:2:p:119-128
    DOI: 10.1007/s10713-005-4674-3
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    Cited by:

    1. Martimort, David & Guillouet, Louise, 2020. "Precaution, Information and Time-Inconsistency: On The Value of the Precautionary Principle," CEPR Discussion Papers 15266, C.E.P.R. Discussion Papers.

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    Keywords

    irreversibility; information structures;

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