Optimal price subsidies under uncertainty

Barbosa, Luciana; Rodrigues, Artur; Sardinha, Alberto

doi:10.1016/j.ejor.2022.02.024

Cited by 7 publications

(3 citation statements)

References 16 publications

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“…where E is an undetermined parameter and β 2 > 1 is the positive root of Equation (5). At the investment threshold (V * ) with and without demand guarantee, the value matching condition and smooth pasting condition should satisfy:…”

Section: Real Option Model Under Lower Demand Guarantee Policymentioning

confidence: 99%

“…However, it should be noted that such projects are still confronted with many uncertain factors and high operational risks, and the thought that making government departments take sole responsibility for investment and operation is irrational [3]. It is necessary to apply government guarantee policies [4] (such as demand guarantee policies and income guarantee policies [5,6]) to attract social capital for investment and achieve high-speed development in waste incineration. To encourage social capital to invest in waste incineration power generation projects, relevant departments usually provide demand guarantee policies.…”

Section: Introduction 1background and Motivationmentioning

confidence: 99%

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Research on an Investment Decision Model of Waste Incineration Power under Demand Guarantee Policies

Dong,

Zhuang

2023

Sustainability

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In order to encourage social capital to sustainably enter waste incineration power generation projects, policy-makers propose demand guarantee policies to ensure the fundamental interests of social capital. Nowadays, demand guarantee policies in China are artificially set based on industry experience and similar biomass power generation projects but lack theoretical support, thus bringing pitfalls to sustainable development. To address this issue, this paper constructs a decision model under the Real Option Approach to obtain investment triggers and guarantee level. Under lower, upper and bidirectional demand guarantee policies, this paper compares three Real Option models considering uncertain factors. The results show that demand guarantee policies usually have an excess guarantee phenomenon that affects long-term interests, and the lower demand guarantee policy can most effectively promote social capital to invest. Policy-makers can choose appropriate policies based on their demands or adjust existing guarantee policies to avoid the excessive guarantees phenomenon and attract social capital to invest in waste incineration.

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Section: Real Option Model Under Lower Demand Guarantee Policymentioning

confidence: 99%

Section: Introduction 1background and Motivationmentioning

confidence: 99%

Research on an Investment Decision Model of Waste Incineration Power under Demand Guarantee Policies

Dong,

Zhuang

2023

Sustainability

View full text Add to dashboard Cite

show abstract

“…Here are two contributions that are close to our research. Barbosa, Rodrigues, & Sardinha (2022) obtain that a private firm's investment is relatively late in terms of social welfare. From the perspective of a regulator, they show there is an optimal subsidy level such that it induces the investor to invest at the socially optimal timing.…”

Section: Related Literaturementioning

confidence: 99%