[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/cpr/ceprdp/2027.html
   My bibliography  Save this paper

A Theory of Haste with Applications to Construction of Nuclear Power Plants and Extinction of Endangered Species

Author

Listed:
  • Brocas, Isabelle
  • Carrillo, Juan D
Abstract
We consider the decision of an agent with time inconsistent preferences to undertake an irreversible investment that yields an uncertain current benefit and a delayed cost. We show that, if the flow of information revealed between periods when the investment is postponed is sufficiently high, there is an expected positive information value of waiting. Hence, as under time consistency, only projects with positive Net Present Value (NPV) are initiated. By contrast, if the amount of information transmitted is small, the agent's expected information value of waiting is negative. As a result, an individual may rationally decide to undertake an investment with negative NPV, only to prevent a future investment profitable from a future perspective but highly detrimental from the current viewpoint. We argue that this provides a rationale for haste, i.e. for the tendency of agents to embark on irreversible activities anticipating expected losses. We also discuss some applications of our theory such as impulse buying, destruction of the environment and preservation of endangered species.

Suggested Citation

  • Brocas, Isabelle & Carrillo, Juan D, 1998. "A Theory of Haste with Applications to Construction of Nuclear Power Plants and Extinction of Endangered Species," CEPR Discussion Papers 2027, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2027
    as

    Download full text from publisher

    File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2027
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    haste; investment under uncertainty; Time Inconsistency;
    All these keywords.

    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2027. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.cepr.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.