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Arrow-Fisher-Hanemann-Henry and Dixit-Pindyck option values under strategic interactions

Author

Listed:
  • Tomoki Fujii

    () (School of Economics, Singapore Management Unversity)

  • Ryuichiro Ishikawa

    () (Faculty of Engineering, Information and Systems,University of Tsukuba)

Abstract

We extend the Arrow-Fisher-Hanemann-Henry (AFHH) and Dixit-Pindyck (DP) option values to game situations. By reinterpreting the AFHH option value as a change in the surplus from conservation because of the prospect of future information, we deal with the conceptual difficulty associated with the AFHH option value in the presence of strategic interactions. We then introduce the DP option value into a game situation. We show that the equivalence between the expected value of information and the DP option value in the standard model does not hold under strategic interactions.

Suggested Citation

  • Tomoki Fujii & Ryuichiro Ishikawa, 2011. "Arrow-Fisher-Hanemann-Henry and Dixit-Pindyck option values under strategic interactions," Working Papers 13-2011, Singapore Management University, School of Economics.
  • Handle: RePEc:siu:wpaper:13-2011
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    Cited by:

    1. Traeger, Christian P., 2014. "On option values in environmental and resource economics," Resource and Energy Economics, Elsevier, vol. 37(C), pages 242-252.

    More about this item

    Keywords

    Irreversibility; Quasi-option values; Biodiversity; Uncertainty; Value of Information;

    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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