The objective of the research presented in this paper is the development of a stochastic adoption threshold. The option pricing Approach for modeling investment under uncertainty is extended for the case of comparing two stochastic input prices associated with inputs that are perfect substitutes...

The hypothesis underlying this analysis is that in the presence of volatile gasoline prices competitive market forces will yield alternative, less volatile fuels as substitutes. A real-option pricing approach was employed for this analysis by modeling investment under uncertainty for the case of...

Dramatic increases in levels and volatility of gasoline prices observed in recent years may create market incentives for adoption of alternative fuels characterized by lower price volatility. This hypothesis is investigated by applying the real-options pricing approach to develop optimal...

Policy makers should consider price volatility effects when determining appropriate spending levels for alternative fuel programs.

The objective of the research presented in this paper is the development of a stochastic adoption threshold. The option pricing approach for modeling investment under uncertainty is extended for the case of comparing two stochastic input prices associated with inputs that are perfect substitutes...