We consider a firm that must undergo a costly and time-consuming regulatory process before making an irreversible, lagged investment whose value varies randomly. We analyze two cases: regulatory approval is valid forever or it expires after some time. We apply our model to Hydro-Québec's...

Using real options, we formulate an optimal stopping model for applying pest control measures when the density of a pest population fluctuates randomly. This model is applied to the control of a foliar pest of apples (the European Red Mite) via a pesticide, and solved numerically by a...

We consider a firm that must undergo a costly and time-consuming regulatory process before making an irreversible, lagged investment whose value varies randomly. We analyze two cases: regulatory approval is valid forever or it expires after some time. We apply our model to Hydro-Québec's...

This paper analyses the decision to invest to reduce the emissions of a stock pollutant under environmental uncertainty. It shows that this decision depends on the type and level of uncertainty. When uncertainty is small, there is no simple irreversibility effect because of the tension between...

In this article we study the effect of uncertainty on an entrepreneur who must choose the capacity of his business before knowing the demand for his product. The unit profit of operation is known with certainty but there is no flexibility in our one-period framework. We show how the introduction...

In this article we study the effect of uncertainty on an entrepreneur who must choose the capacity of his business before knowing the demand for his product.

Models use for natural resources prices usually preclude the possibility of large changes (jumps) resulting from discrete, unexpected events. To test for the presence of jumps and ARCH effects, we propose to use bounds and bootstrap test techniques, thus solving the unidentified nuisance...

Models used for natural resources prices usually preclude the possibility of large changes (jumps) resulting from discrete, unexpected events. To test for the presence of jumps and ARCH effects, we propose to use bounds and bootstrap test techniques, thus solving the unidentified nuisance...

Do investment models fit firm-level data? - which model fits best? To answer this question we estimate alternative models using Compustat data. We find that both a version of the Hayashi (1982) and a model with decreasing returns to scale in production fit firm-level data very well. Our...

Firms in many situations must make investment decisions long before they meet with new capital suppliers. In addition, most physical capital is specific to a task or location, thus implying potentially important switching costs in case negotiations between a firm and a supplier break down. The...