The Value of Endogenous above Exogenous Information in Irreversible Environmental Decisions

This paper introduces the concept of the Testing Value into the analysis of environmental decisions under uncertainty and irreversibility. It is defined as the value of endogenous above exogenous information. We start from a situation where information concerning future economic benefits and costs of resource preservation is exogenous. We show that if information can also depend on the level of development carried out (i.e., it may be acquired also endogenously) the Testing Value could push a risk-neutral decision maker to preserve more in the present and eventually in the future. Although its existence stems from endogenous information, surprisingly enough, the Testing Value can be positively related to the probability of acquiring information exogenously. JEL references: C61; D81; Q32.