A note on option value and the expected value of consumer's surplus

Anderson Jr., R.J. (1980). A note on option value and the expected value of consumer's surplus. Journal of Environmental Economics and Management 8 (2) 187-191. 10.1016/0095-0696(81)90007-3.

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In roughly contemporaneous papers, Cicchetti and Freeman (Quart. J. Econ., 1971) and Schmalensee (Ame. Econ. Rev., 1972) reached apparently conflicting conclusions about the sign taken by option value. Cicchetti and Freeman conclude that option value i salways non-negative. Schmalensee concludes that option value may be either positive or negative, depending upon the circumstances. This paper reconciles these seemingly contradictory conclusions. It is demonstrated that Cicchetti and Freeman's unambiguous conclusions concerning the sign of option value are the result of two special strong assumptions not imposed by Schmalensee.

Item Type: Article
Research Programs: Resources and Environment Area (REN)
Bibliographic Reference: Journal of Environmental Economics and Management; 8(2):187-191 (June 1980)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 01:47
Last Modified: 12 May 2016 11:50
URI: http://pure.iiasa.ac.at/1209

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