Jiakun Zheng

Internal seminars
Eco-lunch

Jiakun Zheng

AMSE
Accounting for Ex Post Regret in Evaluating Sustainable Actions
Venue

MEGA Salle Carine Nourry

MEGA - Salle Carine Nourry

Maison de l'économie et de la gestion d'Aix
424 chemin du viaduc
13080 Aix-en-Provence

Date(s)
Thursday, May 15 2025| 12:00pm to 1:00pm
Contact(s)

Nathalie Ferrière: nathalie.ferriere[at]sciencespo-aix.fr
Federico Trionfetti: federico.trionfetti[at]univ-amu.fr

Abstract

When evaluating public programs with long-term effects, future benefits (or costs) must be discounted to their present value. Modern finance theory recommends pursuing projects with a positive expected Net Present Value (NPV) and rejecting those without. However, a project with a positive expected NPV can still result in an undesirable ex post outcome, creating public regret and reducing long-term societal well-being. In this paper, I introduces a regret-minimization framework for evaluating sustainable policies, incorporating Savage’s min-max regret criterion and the expected NPV approach as limiting cases. I demonstrate that regret-risk aversion and the skewness of a project's contingent valuation significantly influence project evaluation. Additionally, I provide an analytical solution under Savage’s min-max regret criterion, which holds strong normative appeal in the face of deep uncertainty.