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Quasi-option value and hard uncertainty

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  • BASILI, MARCELLO

Abstract

The notion of intertemporal h-option value is introduced to extend to environmental decision-making problems of the concept of quasi-option value, defined by Arrow and Fisher and Henry, whenever an individual faces imprecise information, or hard uncertainty, represented by a non-additive measure over events. Under hard uncertainty and irreversibility, the decision-maker faces the intertemporal h-option value, that is an uncertainty premium of preservation, which represents the gain from being able to learn about the future consequences of irreversible actions. The intertemporal h-option value is a correction factor that has to be taken into account in evaluating the total economic value of feasible actions.

Suggested Citation

  • Basili, Marcello, 1998. "Quasi-option value and hard uncertainty," Environment and Development Economics, Cambridge University Press, vol. 3(4), pages 417-423, October.
    • Handle: RePEc:cup:endeec:v:3:y:1998:i:04:p:417-423_00
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    Cited by:

    1. Marcello Basili & Fulvio Fontini, 2005. "Quasi-option value under ambiguity," Economics Bulletin, AccessEcon, vol. 4(3), pages 1-10.
    2. repec:ebl:ecbull:v:4:y:2005:i:3:p:1-10 is not listed on IDEAS
    3. Marcello Basili & Mauriziop Franzini, 2005. "The Avian Flu Disease: A Case of Precautionary Failure," Department of Economics University of Siena 454, Department of Economics, University of Siena.

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