Un modèle canonique d'option réelle bayesienne et son application au principe de précaution
Uncertainty on effective stocks or damages is the core of most irreversible economic decisions involving natural resources and the environment and, more generally, of most investment decisions. The discussion on the relevance of the precautionary principle is illustrative of this role. Although there is an extensive literature dealing with the theoretical aspects of this problem, economists still lack an operational decision rule. The matter is that the real option theory, now widely used to deal with markovian uncertainty, i.e. independent exogenous repeated chocks affecting the expected return from an irreversible project as time goes, is not adequate to analyze problems characterized by Bayesian uncertainty, i.e. problems where uncertainty about the effective value of parameters is resolved with time by a learning process based on the acquisition of information in the form of quantitative as well as qualitative signals. This paper is aimed at remedying at these shortcomings. The real option theory is adapted to an explicit Bayesian learning process in continuous time. Application to Genetically Modified Organisms farming is used as an illustrative example.
Volume (Year): (2008)
Issue (Month): 89 ()
|Contact details of provider:|| Postal: |
Web page: http://annales.ensae.fr/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:adr:anecst:y:2008:i:89:p:03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Robert Gary-Bobo)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.