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Quasi-option Value under Strategic Interactions

Author

Listed:
  • Tomoki Fujii

    (School of Economics, Singapore Management University)

  • Ryuichiro Ishikawa

    (Graduate School of Systems and Information Engineering, University of Tsukuba)

Abstract

We 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.

Suggested Citation

  • Tomoki Fujii & Ryuichiro Ishikawa, 2011. "Quasi-option Value under Strategic Interactions," Working Papers 04-2011, Singapore Management University, School of Economics.
    • Handle: RePEc:siu:wpaper:04-2011
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    JEL classification:

    • 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

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