The Impact Of Market Structure And Irreversibility On Investment Under Uncertainty
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Investment under Uncertainty
Author | : Robert K. Dixit |
Publisher | : Princeton University Press |
Total Pages | : 484 |
Release | : 2012-07-14 |
Genre | : Business & Economics |
ISBN | : 1400830176 |
How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditional economic models of investment failed to explain the behavior of investment spending in the United States and other countries? In this book, Avinash Dixit and Robert Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made. In so doing, they answer important questions about investment decisions and the behavior of investment spending. This new approach to investment recognizes the option value of waiting for better (but never complete) information. It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment. The authors present the new theory in a clear and systematic way, and consolidate, synthesize, and extend the various strands of research that have come out of the theory. Their book shows the importance of the theory for understanding investment behavior of firms; develops the implications of this theory for industry dynamics and for government policy concerning investment; and shows how the theory can be applied to specific industries and to a wide variety of business problems.
Irreversibility, Uncertainty, and Investment
Author | : Robert S. Pindyck |
Publisher | : World Bank Publications |
Total Pages | : 58 |
Release | : 1989 |
Genre | : Capital investments |
ISBN | : |
Irreversible investment is especially sensitive to such risk factors as volatile exchange rates and uncertainty about tariff structures and future cash flows. If the goal of macroeconomic policy is to stimulate investment, stability and credibility may be more important than tax incentives or interest rates.
Real Options and Investment Under Uncertainty
Author | : Eduardo S. Schwartz |
Publisher | : MIT Press |
Total Pages | : 890 |
Release | : 2004 |
Genre | : Business & Economics |
ISBN | : 9780262693189 |
The study of investment under uncertainty was stagnant for several decades until developments in real options revitalized the field. The topics covered in this book include the reasons behind the under-investment programme.
Irreversibility, Uncertainty, and Investment
Author | : Robert S. Pindyck |
Publisher | : |
Total Pages | : 75 |
Release | : 2010 |
Genre | : |
ISBN | : |
Most investment expenditures have two important characteristics: First, they are largely irreversible; the firm cannot disinvest, so the expenditures are sunk costs. Second, they can be delayed, allowing the firm to wait for new information about prices, costs, and other market conditions before committing resources. An emerging literature has shown that this has important implications for investment decisions, and for the determinants of investment spending. Irreversible investment is especially sensitive to risk, whether with respect to future cash flows, interest rates, or the ultimate cost of the investment. Thus if a policy goal is to stimulate investment, stability and credibility may be more important than tax incentives or interest rates. This paper presents some simple models of irreversible investment, and shows how optimal investment rules and the valuation of projects and firms can be obtained from contingent claims analysis, or alternatively from dynamic programming. It demonstrates some strengths and limitations of the methodology, and shows how the resulting investment rules depend on various parameters that come from the market environment. It also reviews a number of results and insights that have appeared in the literature recently, and discusses possible policy implications.
Investment and Risk in Africa
Author | : Paul Collier |
Publisher | : Springer |
Total Pages | : 391 |
Release | : 2016-07-27 |
Genre | : Business & Economics |
ISBN | : 1349150681 |
This book brings together academics in the fields of economics, political science, and law, with business practitioners in the fields of risk assessment and portfolio management. Their contributions are sequenced to tell a story. Africa is perceived as being a highly risky continent. As a result, investment is discouraged. These risks are partly exaggerated. However, to the extent that they reflect genuine problems, they are capable of being mitigated by insurance and reduced by political restraints such as central banks, investment charters, and international agreements.
Determinants of inverstment behaviour
Author | : Mark Jan-Jochem Koetse |
Publisher | : Rozenberg Publishers |
Total Pages | : 217 |
Release | : 2003 |
Genre | : |
ISBN | : 9051707290 |