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Investment Under Uncertainty and Time-Inconsistent Preferences
Grenadier, Steven R. - 2006
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...
Persistent link: https://www.econbiz.de/10012466627
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The finance uncertainty multiplier
Alfaro, Iván; Bloom, Nicholas; Lin, Xiaoji - 2018
We show how real and financial frictions amplify the impact of uncertainty shocks. We build a model with real frictions, and find adding financial frictions roughly doubles the impact of uncertainty shocks. Higher uncertainty alongside financial frictions induces the standard real-options...
Persistent link: https://www.econbiz.de/10011895833
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Flexible Production and Entry : Institutional, Technological, and Organizational Determinants
Belenzon, Sharon - 2019
Academics, the media, and policymakers have all raised concerns about the implications of human workers being replaced by machines or software. Few have discussed the implications of the reverse: firms' ability to replace capital with workers. We show that this flexibility can help new firms...
Persistent link: https://www.econbiz.de/10012479610
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The Valuation of Fisheries Rights : A Real Options Approach
Pizarro, Jose - 2018
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...
Persistent link: https://www.econbiz.de/10012480792
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Real Options in a Dynamic Agency Model, with Applications to Financial Development, IPOs, and Business Risk
Philippon, Thomas - 2007
We study investment options in a dynamic agency model. Moral hazard creates an option to wait and agency conflicts affect the timing of investment. The model sheds light, theoretically and quantitatively, on the evolution of firms' dynamics, in particular the decline of the failure rate and the...
Persistent link: https://www.econbiz.de/10012465063
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Irreversible Investment, Real Options, and Competition : Evidence from Real Estate Development
Bulan, Laarni - 2006
idiosyncratic and systematic risk lead developers to delay new real estate investments. Empirically, a one-standard deviation … between idiosyncratic risk and development. These results support models in which competition erodes option values and provide … clear evidence for the real options framework over alternatives such as simple risk aversion …
Persistent link: https://www.econbiz.de/10012466179
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Sunk Costs and Real Options in Antitrust
Pindyck, Robert S. - 2005
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...
Persistent link: https://www.econbiz.de/10012467249
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Investment Timing, Agency, and Information
Grenadier, Steven R. - 2005
This paper provides a model of investment timing by managers in a decentralized firm in the presence of agency conflicts and information asymmetries. When investment decisions are delegated to managers, contracts must be designed to provide incentives for managers to both extend effort and...
Persistent link: https://www.econbiz.de/10012467537
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R&D Investments with Competitive Interactions
Miltersen, Kristian R. - 2004
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...
Persistent link: https://www.econbiz.de/10012468435
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Patents and R&D as Real Options
Schwartz, Eduardo S. - 2003
This article develops and implements a simulation approach to value patents and patent-protected R&D projects based on the Real Options approach. It takes into account uncertainty in the cost-to-completion of the project, uncertainty in the cash flows to be generated from the project, and the...
Persistent link: https://www.econbiz.de/10012468580