Resource title

The Dixit-Pindyck and the Arrow-Fisher-Hanemann-Henry option values are not equivalent

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image for OpenScout resource :: The Dixit-Pindyck and the Arrow-Fisher-Hanemann-Henry option values are not equivalent

Resource description

Fisher [2000, this journal] offers a unifying framework for two concepts of (quasi-) option value suggested by Arrow, Fisher, Hanemann, and Henry (AFHH) on the one hand, and by Dixit and Pindyck (DP) on the other, and claims these two concepts to be equivalent. We show that this claim is not correct and point out the flaws in Fisher's proof. We further suggest a decomposition of the DP option value into two components, one of which corresponds exactly to the AFHH option value which captures the value of obtaining new information, and a second one which captures the postponement value irrespective of uncertainty.

Resource author

Paul Mensink, Till Requate

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22069

Resource license

Adapt according to the presented license agreement and reference the original author.