not rely on the “smooth-pasting condition.” An application to MacDonald and Siegel’s canonical investment problem (1986 …) shows that the standard investment threshold over-estimates the optimal threshold when the lower barrier is absorbing and …

small, uncertainty affects investment negatively; (ii) A sufficiently large time lag engenders an inverse u …The effect that investment lags has on the uncertainty-investment relationship is studied by modifying the Bar-Ilan and …-shape relationship between the degree of uncertainty and the profit level that triggers investment; (iii) When such an inverse u- shape …

The role that Bernanke’s Bad News Principle plays in the modern theory of investment under uncertainty is analyzed. The … analysis shows that the actual investment dilemma is that by delaying investment firms trade off a higher present value of … earnings for a lower present value of the investment cost, in contrast to previous interpretations of this dilemma. The …

order conditions for optimizing behavior fail and duality theory fails. When neither curvature nor monotonicity are imposed …

, accountability, transparency, flexibility, and both goal and instrument independence; 2) Theoretical analysis of discrepancies of the …

duopoly with aggregate demand uncertainty. We find that limited liability and investment irreversibility is likely to produce …This paper investigates the interplay of investment irreversibility, predatory behavior, and limited liability in a … of all competitors determine the market price. If now investment is irreversible, it is a strong commitment. It hence …

This paper presents a simple discrete time model for valuing real options. A short proof of optimal exercise rules for … the standard problems in the real options theory is given in the binomial and trinomial models, and more generally, when … the underlying uncertainty is modelled as a random walk on a lattice. The method of the paper is based on the use of the …

investment. Our case study, using real data, indicates that when the decision to build is considered, the plant’s flexibility and … is used for price process, enabling analysis of the value of operating flexibility, the opportunity to sell and abandon …

Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when …, computationally simple approach to real options in discrete time. Explicit formulas are derived even for embedded options. Discrete … time processes reflect the scarcity of observations in the data, and may account for fat tails and skewness of probability …