On the Valuation of Uncertainty in Welfare Analysis

16 Pages Posted: 31 Mar 2020

See all articles by Jean‐Paul Chavas

Jean‐Paul Chavas

University of Maryland

Daniel Mullarkey

University of Wisconsin - Madison

Date Written: February 2002

Abstract

This article develops a general model of private and public choice under temporal uncertainty. The model incorporates the effects of risk preferences and the prospect of future learning into both the individual and aggregate valuations of public projects. The analysis provides new insights on individual valuation, its implications for benefit‐cost analysis and the characterization of Pareto‐efficiency under uncertainty. It also resolves some of the confusion in the option value and quasioption value literature.

Keywords: information, option value, quasi‐option value, risk, uncertainty, welfare, D810, H430

Suggested Citation

Chavas, Jean‐Paul and Mullarkey, Daniel, On the Valuation of Uncertainty in Welfare Analysis (February 2002). American Journal of Agricultural Economics, Vol. 84, Issue 1, pp. 23-38, 2002, Available at SSRN: https://ssrn.com/abstract=3564612 or http://dx.doi.org/10.1111/1467-8276.00240

Jean‐Paul Chavas (Contact Author)

University of Maryland

Daniel Mullarkey

University of Wisconsin - Madison

716 Langdon Street
Madison, WI 53706-1481
United States

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