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

Tomoki Fujii and Ryuichiro Ishikawa

No 13-2011, Working Papers from Singapore Management University, School of Economics

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.

Keywords: Irreversibility; Quasi-option values; Biodiversity; Uncertainty; Value of Information (search for similar items in EconPapers)
JEL-codes: C72 H43 Q50 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2011-11
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Published in SMU Economics and Statistics Working Paper Series

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Journal Article: Arrow-Fisher-Hanemann-Henry and Dixit-Pindyck Option Values Under Strategic Interactions (2013)
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