Title
The implications of irreversibility in emergency response decisions The implications of irreversibility in emergency response decisions
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Dordrecht ,
Subject
Economics
Source (journal)
Theory and decision. - Dordrecht
Volume/pages
49(2000) :1 , p. 25-51
ISSN
0040-5833
ISI
000089149800002
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
The irreversibility effect implies that a decision maker who neglects the prospect of receiving more complete information at later stages of a sequential decision problem will in certain cases too easily take an irreversible decision, as he ignores the existence of a positive option value in favour of reversible decisions. This option value represents the decision maker's flexibility to adapt subsequent decisions to the obtained information. In this paper we show that the economic models dealing with irreversibility as used in environmental and capital investment decision making can be extended to emergency response decisions that produce important irreversible effects. In particular, we concentrate on the decision whether or not to evacuate an industrial area threatened by a possible nuclear accident. We show in a simple two-period evacuation decision model that non-optimal conclusions may be drawn when evacuation is regarded as a 'now or never decision'. The robustness of these results is verified by means of a sensitivity analysis of the various model parameters. The importance of 'options thinking' in this decision context is illustrated in an example.
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