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The Value of Information in Water Quality Monitoring and Management

Author

Listed:
  • Amelie Luhede
  • Houda Yaqine
  • Reza Bahmanbijari
  • Michael Römer
  • Thorsten Upmann

Abstract

Environmental managers face substantial uncertainty when deciding on management actions. To reduce this uncertainty prior to decision-making, collecting new data may help arrive at more informed decisions. Whether any resulting improvement in the decision will outweigh the cost of collecting the data, and thus make investing in the acquisition of the information worthwhile, is an intricate question. The concept of the value of information (VoI) is a convenient tool to address this problem. We use the VoI framework to analyse a decision problem in water quality management. Based on real-world monitoring data, we calculate the VoI of monitoring nitrogen, which is used as an indicator of the ecological state of water body. We find that the VoI is significant in our case and we further investigate the dependency of the VoI in a similar setting on the management cost, the assumed value of a good state and on the level of uncertainty regarding the ecological state. In addition, we observe a negative relation between the relative management cost and the prior probability that maximises VoI. These insights may help decide on information acquisition in the presence of substantial uncertainties and sparse data.

Suggested Citation

  • Amelie Luhede & Houda Yaqine & Reza Bahmanbijari & Michael Römer & Thorsten Upmann, 2023. "The Value of Information in Water Quality Monitoring and Management," CESifo Working Paper Series 10307, CESifo.
    • Handle: RePEc:ces:ceswps:_10307
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp10307.pdf
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    value of information; decision analysis; uncertainty; environmental management; monitoring;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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