Precautionary Effect and Variations of the Value of Information
AbstractFor a sequential, two-period decision problem with uncertainty and under broad conditions (non-finite sample set, endogenous risk, active learning and stochastic dynamics), a general sufficient condition is provided to compare the optimal initial decisions with or without information arrival in the second period. More generally the condition enables the comparison of optimal decisions related to different information structures. It also ties together and clarifies many conditions for the so-called irreversibility effect that are scattered in the environmental economics literature. A numerical illustration with an integrated assessment model of climate-change economics is provided.
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Bibliographic InfoPaper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2005.28.
Date of creation: Feb 2005
Date of revision:
Value of Information; Uncertainty; Irreversibility effect; Climate change;
Find related papers by JEL classification:
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q29 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-24 (All new papers)
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