Adoption of uncertain multi-stage technology projects: a real options approach

Alvarez, Luis H. R.; Stenbacka, Rune

doi:10.1016/s0304-4068(00)00050-1

Cited by 59 publications

(52 citation statements)

References 11 publications

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“…This result is in line with Proposition 8, as it implies that lower risk aversion increases the attractiveness of a leapfrog strategy. By contrast, an increase in price uncertainty in the third (new) regime raises both p (2) 1 and p (3) 1 , yet has a more pronounced effect on the latter. In turn, this implies that greater price uncertainty in the new market regime increases the wedge between p (2) 1 and p (3)…”

Section: A C C E P T E D Mmentioning

confidence: 91%

“…More specifically, they consider the problem of optimal switching from one stochastic cash flow representation to another, which, contrary to Alvarez & Stenbacka (2001), implies a structural change in the project's cash flows in terms of a change in volatility while keeping the drift constant. They conclude that increasing volatility does not necessarily postpone investment.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Thus, the decisionmaker must select the time τ (3) 1 that solves problem (4), where E [·|F t ] is the expectation operator that is conditional on the information at time t and S is the set of stopping times of the filtration generated…”

Section: Regimementioning

confidence: 99%

“…1 , and the required investment threshold, p (3) 1 , as indicated in (8). Notice that, although the investment threshold is usually expressed in terms of β 1k , it is more expedient to use β 2k here, taking into account that β 1k…”

Section: Regimementioning

confidence: 99%

“…Notice that the impact of σ 3 on (β 13 is common for both the left and the righthand side of (B-7), and, therefore, the impact of σ 3 on the MB and MC of accelerating abandonment depends on its impact on A (3) U p (3) 1 D 3 . From Proposition 2, we know that ∂p (3) 1 ∂σ 3 > 0, and, therefore, we conclude that ∂ ∂σ 3 MB > ∂ ∂σ 3 MC, ∀γ.…”

Section: A C C E P T E D Mmentioning

confidence: 99%

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Optimal regime switching under risk aversion and uncertainty

Chronopoulos

Lumbreras

2017

European Journal of Operational Research

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Highlights• We develop a regime-switching, utility-based framework for sequential investment• Greater price uncertainty and risk aversion may accelerate regime switching• Greater risk aversion promotes a compulsive and a laggard regime-switching strategy • Higher output price or innovation rate mitigates the impact of risk aversion• A leapfrog/laggard strategy may dominate even when a decisionmaker is risk averse

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Section: A C C E P T E D Mmentioning

confidence: 91%

Section: Literature Reviewmentioning

confidence: 99%

Section: Regimementioning

confidence: 99%

Section: Regimementioning

confidence: 99%

Section: A C C E P T E D Mmentioning

confidence: 99%

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Optimal regime switching under risk aversion and uncertainty

Chronopoulos

Lumbreras

2017

European Journal of Operational Research

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Non‐linearity in the cost‐effectiveness frontier

2006

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Conventional cost-effectiveness decision rules rely on the assumptions that all health care programmes are divisible and exhibit constant returns to scale for a homogeneous population; hence, the path between adjacent programmes on a cost-effectiveness frontier must be linear. In this paper we build a framework to analyse non-linear 'expansion' paths. We model the impact of two key sources of non-linearity: economies of scale or scope in the production of health care; and prioritisation of patients who are most likely to benefit from more expensive and more effective treatments. We conclude that the expansion path might be linear, convex or concave, depending on the situation. The path might also exhibit vertical discontinuity due to fixed costs or horizontal discontinuity due to indivisibility. The efficiency of resource allocation might be improved by empirical estimation of expansion paths. We discuss the advantages and disadvantages of this approach compared with a standard stratified analysis.

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Effects of Temporary Regulation of Asymmetric Access Charges in Telecommunications

Sawada

Nishihara

2015

Manage Decis Econ

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In a liberalized telecommunications market, an incumbent possesses several advantages over any entrant. It has been claimed that in such a market environment, there should be regulation of asymmetric access charges between an incumbent and an entrant. In this paper, we show that asymmetric access charges should be imposed temporarily but not permanently. That is, there should be deregulation once the entrant is fully competitive with the incumbent. This is because temporary regulation accelerates corporate investment and enhances economic welfare. In addition, when the competitive market environment is most intense under temporary regulation, investment timing is at the earliest point, which maximizes consumer surplus. Copyright © 2015 John Wiley & Sons, Ltd.

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Adoption of uncertain multi-stage technology projects: a real options approach

Cited by 59 publications

References 11 publications

Optimal regime switching under risk aversion and uncertainty

Optimal regime switching under risk aversion and uncertainty

Non‐linearity in the cost‐effectiveness frontier

Effects of Temporary Regulation of Asymmetric Access Charges in Telecommunications

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