| DETERMINANTS OF PARTICIPATION IN ACCELERATED VEHICLE-RETIREMENT PROGRAMS: AN OPTION VALUE MODEL OF THE SCRAPPAGE DECISION |
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| Michele Moretto, University of Padua and Fondazione ENI Enrico Mattei |
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| JEL classification : H510, H530, I190, L620, O130, Q210 |
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| Abstract |
| Unlike the optimal behaviour of vehicle owners in deciding to participate or not in a scrapping program, the irreversibility generally involved in a decision to scrap a car and the underlying value of waiting for new information about the profitability of such a change, which may substantially affect the scrapping time, are not modeled correctly in the literature. The article develops a framework that does not have the unfavorable characteristics of the previous work in the area to investigate the ability of a vehicle-retirement program to attract old cars by calibrating a simple stochastic owner’s decision model that accounts for this option value insight. |
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