Quasi-option Value under Strategic Interactions

Tomoki Fujii and Ryuichiro Ishikawa

No 04-2011, Working Papers from Singapore Management University, School of Economics

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.

Keywords: Biodiversity; Irreversibility; Quasi-option value; Uncertainty; Value of Information (search for similar items in EconPapers)
JEL-codes: C72 H43 Q50 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2011-03
New Economics Papers: this item is included in nep-env and nep-gth
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Published in SMU Economics and Statistics Working Paper Series

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Journal Article: Quasi-option value under strategic interactions (2012)
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