Policy Design as an Irreversible Investment Under Uncertainty: Norwegian Agriculture and the WTO
This 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.
|Date of creation:||2002|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.eaae.org|
More information through EDIRC
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.:
- Rickertsen, Kyrre, 1998. "The demand for food and beverages in Norway," Agricultural Economics, Blackwell, vol. 18(1), pages 89-100, January.
- Salhofer, K., 1996.
"Efficient income redistribution for a small country using optimal combined instruments,"
Blackwell, vol. 13(3), pages 191-199, February.
- Salhofer, K., 1996. "Efficient income redistribution for a small country using optimal combined instruments," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 13(3), February.
- Pindyck, Robert S., 1998.
"Irreversibilities and the timing of environmental policy,"
WP 4047-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Pindyck, Robert S., 2000. "Irreversibilities and the timing of environmental policy," Resource and Energy Economics, Elsevier, vol. 22(3), pages 233-259, July.
- Kola, Jukka, 1993. "Efficiency of Supply Control Programmes in Income Redistribution," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 20(2), pages 183-98.
- Fisher, Anthony C & Hanemann, W Michael, 1990. "Option Value: Theory and Measurement," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 17(2), pages 167-80.
- Abebayehu Tegene & Keith Wiebe & Betsey Kuhn, 1999. "Irreversible Investment Under Uncertainty: Conservation Easements and the Option to Develop Agricultural Land," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(2), pages 203-219.
When requesting a correction, please mention this item's handle: RePEc:ags:eaae02:24875. 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: (AgEcon Search)
If references are entirely missing, you can add them using this form.