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.
- Decisionmaking under uncertainty
- Irreversibility effect
- Necessary and sufficient conditions
- Nonseparable benefit functions
ASJC Scopus subject areas
- Economics and Econometrics
- Management, Monitoring, Policy and Law