This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Option Value of Scientific Uncertainty on Pest - Resistance Development of Transgenic Crops

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Justus Wesseler (Wageningen University, The Netherlands)

Additional information is available for the following registered author(s):

Abstract

In this paper the option value of waiting under scientific uncertainty will be derived using the difference between the geometric Brownian motion and the mean reverting process by applying contingent claim analysis. The results will be compared with those generated by either using a geometric Brownian motion or a mean-reverting process only. An example based on the decision problem whether or not to release herbicide tolerant rape seed in the EU will be used to illustrate the differences. The paper contributes to the suggestion made by biologists to further analyze the sensitivity of the results using the real option approach, provides insights about the magnitude of error that can be made by choosing the wrong process, provides a solution to the problem and highlights the implication for the decision of whether or not to release transgenic crops. The results show that scientific uncertainty is less important than one would expect at first hand.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://129.3.20.41/eps/othr/papers/0207/0207005.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by EconWPA in its series Others with number 0207005.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 15 Aug 2002
Date of revision:
Handle: RePEc:wpa:wuwpot:0207005

Note: Type of Document - pdf
Contact details of provider:
Web page: http://129.3.20.41

For technical questions regarding this item, or to correct its listing, contact: (EconWPA).

Related research
Keywords: biotechnology; cost-benefit analysis; real option; scientific uncertainty;

Other versions of this item:

Find related papers by JEL classification:
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. 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. [Downloadable!] (restricted)
  2. Gjolberg, Ole & Guttormsen, Atle G., 2002. "Real options in the forest: what if prices are mean-reverting?," Forest Policy and Economics, Elsevier, vol. 4(1), pages 13-20, May. [Downloadable!] (restricted)
  3. Merton, Robert C, 1998. "Applications of Option-Pricing Theory: Twenty-Five Years Later," American Economic Review, American Economic Association, vol. 88(3), pages 323-49, June. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
  6. Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-12, December. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? About five million pdf files are downloaded through RePEc every year.

This page was last updated on 2009-12-2.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.