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Information acquisition as an American option

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  • Jafarizadeh, Babak

Abstract

Many information acquisition activities can be postponed within a predefined time-frame. In uncertain situations, the option to postpone the information acquisition to a later, more favorable time may create value. We discuss the value that comes from holding an option to acquire information in a time period and suggest a simulation-based numerical approach to calculate the associated value. We discuss that the value of information in a time period may be very different from the value of information in a single point in time. This value is closely linked to the uncertainty of the decision outcomes over the time period.

Suggested Citation

  • Jafarizadeh, Babak, 2012. "Information acquisition as an American option," Energy Economics, Elsevier, vol. 34(3), pages 807-816.
    • Handle: RePEc:eee:eneeco:v:34:y:2012:i:3:p:807-816
    DOI: 10.1016/j.eneco.2011.04.002
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    References listed on IDEAS

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