This paper studies the aggregate implications of microeconomic investment irreversibility and idiosyncratic uncertainty in a simple growth model by highlighting real option effects. We endogenize the drift rate of real option by connecting it to the state of the economy. Thereby, we extend the...

In this paper we analyse a dynamic model of investment under uncertainty in a duopoly, in which each firm has an option to switch from the present market to a new market. We construct a subgame perfect equilibrium in mixed strategies and show that both preemption and attrition can occur along...

The dissertation mainly consists of two articles: INVESTMENTS IN KAZAKHSTANI DAIRY FARMING: A COMPARISON OF THE CLASSICAL INVESTMENT THEORY AND THE REAL OPTIONS APPROACH Abstract This study analyzes the explanatory potential of the real options approach (ROA) regarding the reluctance of...

In this article we analyse the effects of different regulatory schemes (price cap and profit sharing) on a firm s investment of endogenous size. Using a real option approach in continuous time, we show that profit sharing does not affect a firm s start-up decision relative to a pure price cap...