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

  • Tomoki Fujii

    ()

    (School of Economics, Singapore Management Unversity)

  • Ryuichiro Ishikawa

    ()

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

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.

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Paper provided by Singapore Management University, School of Economics in its series Working Papers with number 13-2011.

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Length: 14 pages
Date of creation: Nov 2011
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:13-2011
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