An option-pricing model is developed to rank investments that might improve water quality. The model presumes that two investment options exist that have the potential to alter the stochastic drift of a pollutant. The investments have capital and operating costs and are irreversible once...

An intergenerational model of resource development is constructed to examine the concepts of option and existence value. These concepts are seen to relate to a more fundamental concept: the expected value of perfect information. The analysis would suggest that when sequencing irreversible...

The role of a marine sanctuary, where commercial fishing might be prohibited, is evaluated in two models; one where net biological growth is deterministic, and the other where net biological growth is stochastic. There is diffusion (migration) between the sanctuary and the fishing grounds based...

Ethanol policies have contributed to changes in the levels and the volatilities of revenues and costs facing ethanol firms. The implications of these policies for optimal investment behavior are investigated through an extension of the real options framework that allows for the consideration of...