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

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

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...

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Bibliographic Details
Main Authors: FUJII, Tomoki, ISHIKAWA, Ryuichiro
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2011
Subjects:
Irreversibility
Quasi-option values
Biodiversity
Uncertainty
Value of Information
Behavioral Economics
Strategic Management Policy
Online Access:https://ink.library.smu.edu.sg/soe_research/1314
https://ink.library.smu.edu.sg/context/soe_research/article/2313/viewcontent/afhh_vs_dp_42_.pdf
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Institution: Singapore Management University
Language: English
Description
Summary: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.

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