The real options framework has been used extensively to analyze the timing of investment under uncertainty. While standard real options models assume that agents possess a constant rate of time preference, there is substantial evidence that agents are very impatient about choices in the...

In this article we develop a model to analyze patent-protected R&D investment projects when there is (imperfect) competition in the development and marketing of the resulting product. The competitive interactions that occur substantially complicate the solution of the problem since the decision...

We show how the value of a real option depends on corporate income taxes and the option's "debt capacity," defined as the amount of debt supported or displaced by the option. The value of the underlying asset must be an adjusted present value (APV). The risk-free rate of interest must be...

We develop a real options model of Ramp;D valuation, which takes into account the uncertainty in the quality of the research output, the time and cost to completion, and the market demand for the Ramp;D output. The model is then applied to study the problem of pharmaceutical under-investment in...

We began this project interested in collecting real-world' insight about how environmental regulation affects the paper industry. Based on conversations with people in the industry and visits to paper mills, we formulated several hypotheses related to technology choice in new mills and the...

This paper explores cost-effective low-carbon R&D and capital investment portfolios for the electricity generation sector through 2060. We present a novel method for long-term planning by combining an economic model of endogenous non-linear technical change and a generation capacity planning...

This article develops and implements a Real Option approach to value renewable natural resources in the case of Marine Fisheries. The model includes two sources of uncertainty: the resource biomass and the price of fish, and it can be used by fisheries to optimally adapt their harvesting...

We study when and why firms exercise real options. Using detailed project-level investment data, we find that the likelihood that a firm exercises a real option is strongly related to peer exercise behavior. Peer exercise decisions are as important in explaining exercise behavior as variables...

Sunk costs play a central role in antitrust economics, but are often misunderstood and mismeasured. I will try to clarify some of the conceptual and empirical issues related to sunk costs, and explain their implications for antitrust analysis. I will be particularly concerned with the role of...

We provide a dynamic model of an industry in which agents strategically time liquidation decisions in an effort to protect their reputations. As in traditional models, agents delay liquidation attempting to signal their quality. However, when the industry faces a common shock that...