IDEAS home Printed from https://ideas.repec.org/p/isu/genres/2106.html

Environmental Valuation Under Dynamic Consumer Behavior

Author

Listed:
  • Zhao, Jinhua
  • Kling, Catherine L.

Abstract

The paper presents two simple models of dynamic consumer behavior, both taking into consideration the implications for welfare measurement when agents can delay transactions while obtaining additional information. One model studies the effect when a purchased good is non-perishable and can be consumed in the future, while the other model introduces a perishable good, implying that the quantity of consumption can vary in each period. Even in the case of the perishable item, the availability of information at the time of the consumption decision has important implications for welfare measurement. Agents who must make a decision at the present but know that additional information will be available later may change their income allocation to take advantage of the future information. When this leads to the capture of different information sets at these different times, welfare assessment may be (but is not necessarily) inconsistent with the empirical evidence and may be inappropriate for use in policy valuation.

Suggested Citation

  • Zhao, Jinhua & Kling, Catherine L., 2006. "Environmental Valuation Under Dynamic Consumer Behavior," Staff General Research Papers Archive 2106, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:2106
    as

    Download full text from publisher

    File URL: http://www2.econ.iastate.edu/papers/paper_2106.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jinhua Zhao & Catherine L. Kling, 2004. "Willingness to Pay, Compensating Variation, and the Cost of Commitment," Economic Inquiry, Western Economic Association International, vol. 42(3), pages 503-517, July.
    2. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    3. Kenneth J. Arrow & Anthony C. Fisher, 1974. "Environmental Preservation, Uncertainty, and Irreversibility," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(2), pages 312-319.
    4. Randall, Alan & Stoll, John R, 1980. "Consumer's Surplus in Commodity Space," American Economic Review, American Economic Association, vol. 70(3), pages 449-455, June.
    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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Krüger, Niclas A. & Svensson, Mikael, 2009. "The impact of real options on willingness to pay for mortality risk reductions," Journal of Health Economics, Elsevier, vol. 28(3), pages 563-569, May.
    2. repec:ken:wpaper:0603 is not listed on IDEAS
    3. Jay Corrigan & Catherine Kling & Jinhua Zhao, 2008. "Willingness to Pay and the Cost of Commitment: An Empirical Specification and Test," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 40(2), pages 285-298, June.
    4. Narain, Urvashi & Hanemann, W. Michael & Fisher, Anthony C., 2004. "The Temporal Resolution of Uncertainty and the Irreversibility Effect," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7nn328qg, Department of Agricultural & Resource Economics, UC Berkeley.
    5. Traeger, Christian P., 2014. "On option values in environmental and resource economics," Resource and Energy Economics, Elsevier, vol. 37(C), pages 242-252.
    6. Attanasi, Giuseppe Marco & Montesano, Aldo, 2010. "Testing Value vs Waiting Value in Environmental Decisions under Uncertainty," TSE Working Papers 10-154, Toulouse School of Economics (TSE).
    7. Narain, Urvashi & Hanemann, W. Michael & Fisher, Anthony C, 2007. "The irreversibility effect in environmental decisionmaking," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7bc5t8cf, Department of Agricultural & Resource Economics, UC Berkeley.
    8. Elisabetta Strazzera & Elisabetta Cherchi & Silvia Ferrini, 2008. "A Choice Modelling Approach for Assessment of Use and Quasi-Option Values in Urban Planning for Areas of Environmental Interest," Working Papers 2008.63, Fondazione Eni Enrico Mattei.
    9. Fujii, Tomoki & Ishikawa, Ryuichiro, 2012. "Quasi-option value under strategic interactions," Resource and Energy Economics, Elsevier, vol. 34(1), pages 36-54.
    10. Sims, Charles & Finnoff, David, 2012. "The role of spatial scale in the timing of uncertain environmental policy," Journal of Economic Dynamics and Control, Elsevier, vol. 36(3), pages 369-382.
    11. Charles Sims & David Finnoff, 2016. "Opposing Irreversibilities and Tipping Point Uncertainty," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 3(4), pages 985-1022.
    12. Saltari, Enrico & Travaglini, Giuseppe, 2011. "The effects of environmental policies on the abatement investment decisions of a green firm," Resource and Energy Economics, Elsevier, vol. 33(3), pages 666-685, September.
    13. Charles Sims & David Finnoff & Jason F. Shogren, 2018. "Taking One for the Team: Is Collective Action More Responsive to Ecological Change?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 70(3), pages 589-615, July.
    14. Batabyal, Amitrajeet A., 1998. "Land development and preservation over time and under uncertainty: a review and a research agenda," Ecological Economics, Elsevier, vol. 25(3), pages 233-238, June.
    15. Justus Wesseler, 2002. "The Option Value of Scientific Uncertainty on Pest - Resistance Development of Transgenic Crops," Others 0206001, University Library of Munich, Germany.
    16. V. Bosetti & J.M. Conrad & E. Messinat, 2004. "The Value of Flexibility: Preservation, Remediation, or Development for Ginostra?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 29(2), pages 219-229, October.
    17. Chady Jabbour & Anis Hoayek & Jean-Michel Salles, 2022. "Formalizing a Two-Step Decision-Making Process in Land Use: Evidence from Controlling Forest Clearcutting Using Spatial Information," Land, MDPI, vol. 12(1), pages 1-17, December.
    18. Jinhua Zhao & Catherine L. Kling, 2002. "Environmental Valuation under Dynamic," Center for Agricultural and Rural Development (CARD) Publications 02-wp292, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    19. Hess, Joshua H. & Manning, Dale T. & Iverson, Terry & Cutler, Harvey, 2019. "Uncertainty, learning, and local opposition to hydraulic fracturing," Resource and Energy Economics, Elsevier, vol. 55(C), pages 102-123.
    20. Corrigan, Jay R. & Kling, Catherine L. & Zhao, Jinhua, 2003. "Dynamic Willingness to Pay: An Empirical Specification and Test," Staff General Research Papers Archive 10220, Iowa State University, Department of Economics.
    21. Lewis, David J. & Polasky, Stephen, 2018. "An auction mechanism for the optimal provision of ecosystem services under climate change," Journal of Environmental Economics and Management, Elsevier, vol. 92(C), pages 20-34.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:isu:genres:2106. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Curtis Balmer (email available below). General contact details of provider: https://edirc.repec.org/data/deiasus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.