EconPapers    
Economics at your fingertips  
 

The Option Value of Scientific Uncertainty on Pest - Resistance Development of Transgenic Crops

Justus Wesseler

Others from University Library of Munich, Germany

Abstract: In this paper the option value of waiting under scientific uncertainty will be derived using the difference between the geometric Brownian motion and the mean reverting process by applying contingent claim analysis. The results will be compared with those generated by either using a geometric Brownian motion or a mean-reverting process only. An example based on the decision problem whether or not to release herbicide tolerant rape seed in the EU will be used to illustrate the differences. The paper contributes to the suggestion made by biologists to further analyze the sensitivity of the results using the real option approach, provides insights about the magnitude of error that can be made by choosing the wrong process, provides a solution to the problem and highlights the implication for the decision of whether or not to release transgenic crops. The results show that scientific uncertainty is less important than one would expect at first hand.

Keywords: biotechnology; cost-benefit analysis; real option; scientific uncertainty (search for similar items in EconPapers)
JEL-codes: D61 D81 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2002-06-14
Note: Type of Document - winword; prepared on windows 98; pages: 15
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/othr/papers/0206/0206001.doc.gz (application/msword)
https://econwpa.ub.uni-muenchen.de/econ-wp/othr/papers/0206/0206001.pdf (application/pdf)
https://econwpa.ub.uni-muenchen.de/econ-wp/othr/papers/0206/0206001.ps.gz (application/postscript)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpot:0206001

Access Statistics for this paper

More papers in Others from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).

 
Page updated 2025-03-20
Handle: RePEc:wpa:wuwpot:0206001