Policy Design as an Irreversible Investment Under Uncertainty: Norwegian Agriculture and the WTO
AbstractThis paper is concerned with the timing of an agricultural policy reform under uncertainty. The focus is on the opportunity cost of giving up the option to wait when implementing a policy reform. Including the option value in applied policy analysis can help explain why conventional analyses may find observed policies to be Pareto-inferior. Furthermore, it explains why otherwise profitable policy reforms may be delayed. The theoretical model is applied to Norwegian agricultural policy anticipating a prospective WTO agreement. It is argued that the option value should be incorporated into applied policy analysis when high uncertainty prevails.
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Bibliographic InfoPaper provided by European Association of Agricultural Economists in its series 2002 International Congress, August 28-31, 2002, Zaragoza, Spain with number 24875.
Date of creation: 2002
Date of revision:
Option value; Policy reform; WTO; Norway; Uncertainty; International Relations/Trade; C61; D78;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation
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