TY - JOUR
T1 - The irreversibility effect in environmental decisionmaking
AU - Narain, Urvashi
AU - Hanemann, Michael
AU - Fisher, Anthony
N1 - Funding Information:
Acknowledgements This research received financial support from the National Science Foundation grant No. SES-9818642. The authors gratefully acknowledge comments on earlier drafts of this paper by Christian Gollier, Christian Traeger, an anonymous reviewer, and participants at the International Conference on Risk and Uncertainty in Environmental and Resource Economics, Wageningen, The Netherlands, and Columbia Earth Institute Environmental Economics Seminar.
PY - 2007/11
Y1 - 2007/11
N2 - We provide a new, more general, definition for the irreversibility effect and demonstrate its relevance to problems involving environmental and other decisions under uncertainty. We establish several analytical and numerical results that suggest both that the effect holds more widely than generally recognized, and that an existing result (Epstein's Theorem), giving a sufficient condition for determining whether the effect holds, can be applied more widely than previously indicated, in particular to problems involving intertemporally nonseparable benefit functions. We further show that a low elasticity of intertemporal substitution will however result in failure of the effect.
AB - We provide a new, more general, definition for the irreversibility effect and demonstrate its relevance to problems involving environmental and other decisions under uncertainty. We establish several analytical and numerical results that suggest both that the effect holds more widely than generally recognized, and that an existing result (Epstein's Theorem), giving a sufficient condition for determining whether the effect holds, can be applied more widely than previously indicated, in particular to problems involving intertemporally nonseparable benefit functions. We further show that a low elasticity of intertemporal substitution will however result in failure of the effect.
KW - Decisionmaking under uncertainty
KW - Irreversibility effect
KW - Necessary and sufficient conditions
KW - Nonseparable benefit functions
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U2 - 10.1007/s10640-007-9083-x
DO - 10.1007/s10640-007-9083-x
M3 - Article
AN - SCOPUS:35148881247
SN - 0924-6460
VL - 38
SP - 391
EP - 405
JO - Environmental and Resource Economics
JF - Environmental and Resource Economics
IS - 3
ER -