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This survey focuses on the application of real options methodology to the information and communications technology (ICT) industries. It examines the development of the methodology to areas as diverse as wireless cell site investments to dynamic pricing issues. In addition to aiding the reader...
Persistent link: https://www.econbiz.de/10008511701
bel and Eberly (1999) show that the effect of uncertainty on long run capital accumulation is ambiguous in a real options model with irreversible investment. We show that a higher level of uncertainty tends to reduce expected capital stock levels in a model with strictly convex adjustment costs....
Persistent link: https://www.econbiz.de/10008552187
Two main problems have been emerging in supply chain management: the increasing pressure to reduce working capital and the growing variety of products. Most of the popular indicators have been developed based on a controlled environment. A new indicator is now proposed, based on the uncertainty...
Persistent link: https://www.econbiz.de/10008645105
Given the global financial crisis and, particularly, the European sovereign-debt crisis, European countries have the urgent need to promote output growth. However, due to the current financial constraints, it is difficult for the Governments to stimulate economic growth by directly increasing...
Persistent link: https://www.econbiz.de/10010699074
The real options tradition originally predicted a decreasing relationship between uncertainty and investment, through the positive effect of higher uncertainty on the trigger level for revenue relative to costs. An opposing effect on the probability of reaching the level has been identified,...
Persistent link: https://www.econbiz.de/10010320899
This paper shows that, with (partial) irreversibility, higher uncertainty reduces the impact effect of demand shocks on investment. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed both numerically for a model with a rich mix...
Persistent link: https://www.econbiz.de/10005670582
Divergent trends, as observed, between growth in the financial and real sectors of the global economy entail the need for further research, especially on the motivations behind investment decisions. Investments in market economies are generally guided by call-put option pricing models—which...
Persistent link: https://www.econbiz.de/10012894687
This paper shows that, contrary to common beliefs, the real options effect of uncertainty plays no role in the long run rate of investment. This is proven for both the standard investment model with Cobb-Douglas production and Brownian motion demand, and also for a broader class of models with...
Persistent link: https://www.econbiz.de/10011538116
In this paper we investigate how demand and output price uncertainty affect investment plans of Belgian manufacturing firms. We obtain time-varying uncertainty measures at the firm and industry level from the Belgian monthly business cycle survey and investment plans from the half-yearly...
Persistent link: https://www.econbiz.de/10011623468
In this paper, we extend the usual models of irreversible investment under uncertainty by introducing the stock of public capital as an input for the private sector. Public investment takes place in a stochastic environment. Public capital then increases the productivity of private capital which...
Persistent link: https://www.econbiz.de/10012038764