@article{bc5681f5d663401fbea707333ec1da99,
title = "Uncertainty, benefit-cost analysis, and the treatment of option value",
abstract = "This paper proposes a new conceptual framework for defining welfare measures under uncertainty: the planned expenditure function. This function describes the locus of expenditures on contingent claims that are required to realize a given level of expected utility. To illustrate the convenience of the framework, it is used to consider the definition of the option price, the appropriate treatment of option value, the valuation of risk changes, and the definition of non-use benefits under uncertainty.",
author = "Smith, {V. Kerry}",
note = "Funding Information: *Present address: Department of Economics and Business, North Carolina State University, Raleigh, North Carolina 27695. {\textquoteleft}Initial research was supported by the U.S. Forest Service under Purchase Order 40-82FT-3-758; subsequent support was also provided by the U.S. Environmental Protection Agency under Cooperative Agreement CR-811075. The views expressed in the paper are exclusively those of the author. Thanks are due to K. E. McConnell and two anonymous referees for most helpful comments on an earlier draft of this paper. {\textquoteleft}The discussion in this paper will focus exclusively on the timeless concept of option price as originally developed by Schmalensee [22]. Quasi-option value introduced by Arrow and Fisher [l] and refined recently by Hanemann [lo] is not considered.",
year = "1987",
month = sep,
doi = "10.1016/0095-0696(87)90021-0",
language = "English (US)",
volume = "14",
pages = "283--292",
journal = "Journal of Environmental Economics and Management",
issn = "0095-0696",
publisher = "Academic Press Inc.",
number = "3",
}