Publication Type
Journal Article
Version
acceptedVersion
Publication Date
1-2012
Abstract
We consider a simple two-period model of irreversible investment under strategic interactions between two players. In this setup, we show that the quasi-option value may cause some conceptual difficulties. In case of asymmetric information, decentralized investment decisions fail to induce first-best allocations. Therefore a regulator may not be able to exercise the option to delay the decision to develop. We also show that information-induced inefficiency may arise in a game situation and that under certain assumptions inefficiency can be eliminated by sending asymmetric information to the players, even when the regulator faces informational constraints. Our model is potentially applicable to various global environmental problems.
Keywords
Biodiversity, Irreversibility, Quasi-option value, Uncertainty, Value of information
Discipline
Behavioral Economics | Environmental Policy | Public Economics
Research Areas
Applied Microeconomics
Publication
Resource and Energy Economics
Volume
34
Issue
1
First Page
36
Last Page
54
ISSN
0928-7655
Identifier
10.1016/j.reseneeco.2011.09.002
Publisher
Elsevier
Citation
FUJII, Tomoki and ISHIKAWA, Ryuichiro.
Quasi-option value under strategic interactions. (2012). Resource and Energy Economics. 34, (1), 36-54.
Available at: https://ink.library.smu.edu.sg/soe_research/1375
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.reseneeco.2011.09.002