Quasi-Option Value Under Strategic Interactions

Resource and Energy Economics, Vol. 34, 2012

SMU Economics and Statistics Working Paper No. 04-2011

37 Pages Posted: 13 Apr 2011 Last revised: 3 Nov 2011

See all articles by Tomoki Fujii

Tomoki Fujii

Singapore Management University - School of Economics

Ryuichiro Ishikawa

Waseda University-SILS

Date Written: January 27, 2011

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 demonstrate 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

JEL Classification: C72, H43, Q50

Suggested Citation

Fujii, Tomoki and Ishikawa, Ryuichiro, Quasi-Option Value Under Strategic Interactions (January 27, 2011). Resource and Energy Economics, Vol. 34, 2012; SMU Economics and Statistics Working Paper No. 04-2011. Available at SSRN: https://ssrn.com/abstract=1806972

Tomoki Fujii (Contact Author)

Singapore Management University - School of Economics ( email )

90 Stamford Road
178903
Singapore
+6568280279 (Phone)
+6568280833 (Fax)

HOME PAGE: http://www.mysmu.edu/faculty/tfujii/

Ryuichiro Ishikawa

Waseda University-SILS ( email )

Shinjuku, Tokyo 1658050
Japan

HOME PAGE: http://www.f.waseda.jp/r.ishikawa/

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