A comment on “ An arbitrage - free approach to quasi - option value ” by Coggins and Ramezani ∗ Paul

In their article “An Arbitrage-Free Approach to Quasi-Option Value” [J. Environm. Econom. Management 35, 103-125, 1998], Coggins and Ramezani interpreted the concept of quasi-option value introduced by Arrow and Fisher [Quart. J. Econom. 88, 1974, 312-319] as being identical to Dixit and Pindyck’s real option value. This means their approach differs from the approach by Fisher and Hanemann [J. Environm. Econom. Management 14, 183-190, 1987] who formalized the concept of quasi-option value a decade before. By indirectly characterizing Dixit and Pindyck’s real option value Coggins and Ramezani confirmed classic results in the field of real options theory. ∗I would like to thank Jay Coggins, Andreas von Döllen, Joseph Herriges, Dagmar Nelissen, Cyrus Ramezani, Till Requate and two anonymous reviewers for their critiques and suggestions with respect to earlier versions of this comment, and Diderik Lund for guidance in the field of financial economics. I would like to stress that the persons I thank do not necessarily agree with all claims made in this comment. Part of the research was done at the University of Kiel, Germany; support by the German Research Council (DFG) is gratefully acknowledged. †Independent. Zeye Strasse 30, 24106 Kiel, Germany. E-mail: [email protected]