UNCERTAINTY AND THE VALUE OF INFORMATION WITH STOCHASTIC LOSSES FROM GLOBAL WARMING

Citation
Sc. Peck et Tj. Teisberg, UNCERTAINTY AND THE VALUE OF INFORMATION WITH STOCHASTIC LOSSES FROM GLOBAL WARMING, Risk analysis, 16(2), 1996, pp. 227-235
Citations number
7
Categorie Soggetti
Social Sciences, Mathematical Methods
Journal title
ISSN journal
02724332
Volume
16
Issue
2
Year of publication
1996
Pages
227 - 235
Database
ISI
SICI code
0272-4332(1996)16:2<227:UATVOI>2.0.ZU;2-C
Abstract
We present an uncertainty analysis conducted using CETA-R, a model in which the costs of climate change are specified as Risks of large loss es. In this analysis, we assume that three key parameters may each tak e on ''high'' or ''low'' values, leading to eight possible states of t he world. We then explore optimal policies when the state of the world is known, and under uncertainty. Also, we estimate the benefits of re solving uncertainty earlier. We find that the optimal policy under unc ertainty is similar to the policy that is optimal when each of the key parameters is at its low value. We also find that the value of immedi ate uncertainty resolution rises sharply as the alternative to immedia te resolution is increasingly delayed resolution.