Quasi-option Value under Strategic Interactions
AbstractWe consider a simple two-period model with irreversible investment with strategic interactions. In this setup, we try to extend the concept of the quasi-option value (QOV) by Arrow and Fisher (1974), Henry (1974), Fisher and Hanemann (1987) and Hanemann (1989) to a game-theoretic situation. In doing so, we demostrate some conceptual difficulties with the QOV, and stress the potential importance of information-induced inefficiency. We also show that this inefficiency can be remedied by incorporating sophisticated control of information flow. Our model is potentially applicable to various global environmental problems.
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Bibliographic InfoPaper provided by Singapore Management University, School of Economics in its series Working Papers with number 04-2011.
Length: 39 pages
Date of creation: Mar 2011
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Other versions of this item:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
- Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-05 (All new papers)
- NEP-ENV-2011-09-05 (Environmental Economics)
- NEP-GTH-2011-09-05 (Game Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Bruno Bassan & Olivier Gossner & Marco Scarsini & Shmuel Zamir, 2003.
"Positive value of information in games,"
International Journal of Game Theory,
Springer, vol. 32(1), pages 17-31, December.
- Bruno Bassan & Olivier Gossner & Marco Scarsini & Shmuel Zamir, 2001. "Positive value of information in games," ICER Working Papers - Applied Mathematics Series 26-2003, ICER - International Centre for Economic Research, revised Jul 2003.
- Bruno Bassan & Olivier Gossner & Marco Scarsini & Shmuel Zamir, 2001. "Positive value of information in games," Discussion Paper Series dp294, The Center for the Study of Rationality, Hebrew University, Jerusalem, revised Jul 2002.
- Hanemann, W. Michael, 1989. "Information and the concept of option value," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 23-37, January.
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- Fisher, Anthony C., 2000. "Investment under uncertainty and option value in environmental economics," Resource and Energy Economics, Elsevier, vol. 22(3), pages 197-204, July.
- Arrow, Kenneth J & Fisher, Anthony C, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 312-19, May.
- Conrad, Jon M, 1980. "Quasi-Option Value and the Expected Value of Information," The Quarterly Journal of Economics, MIT Press, vol. 94(4), pages 813-20, June.
- Kamien, Morton I. & Tauman, Yair & Zamir, Shmuel, 1990. "On the value of information in a strategic conflict," Games and Economic Behavior, Elsevier, vol. 2(2), pages 129-153, June.
- Mensink, Paul & Requate, Till, 2005. "The Dixit-Pindyck and the Arrow-Fisher-Hanemann-Henry option values are not equivalent: a note on Fisher (2000)," Resource and Energy Economics, Elsevier, vol. 27(1), pages 83-88, January.
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