Title
The option to abandon : stimulating innovative groundwater remediation technologies characterized by technological uncertainty
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Amsterdam ,
Subject
Chemistry
Biology
Source (journal)
The science of the total environment. - Amsterdam
Volume/pages
496(2014) , p. 63-74
ISSN
0048-9697
ISI
000342245600009
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
Many studies on technology adoption demonstrate that uncertainty leads to a postponement of investments by integrating a wait option in the economic analysis. The aim of this study however is to demonstrate how the investment in new technologies can be stimulated by integrating an option to abandon. Furthermore, this real option analysis not only considers the ex ante decision analysis of the investment in a new technology under uncertainty, but also allows for an ex post evaluation of the investment. Based on a case study regarding the adoption of an innovative groundwater remediation strategy, it is demonstrated that when the option to abandon the innovative technology is taken into account, the decision maker decides to invest in this technology, while at the same time it determines an optimal timing to abandon the technology if its operation proves to be inefficient. To reduce uncertainty about the effectiveness of groundwater remediation technologies, samples are taken. Our analysis shows that when the initial belief in an effective innovative technology is low, it is important that these samples provide correct information in order to justify the adoption of the innovative technology. (C) 2014 Elsevier B.V. All rights reserved.
E-info
https://repository.uantwerpen.be/docman/iruaauth/97b87a/82c8642.pdf
Full text (open access)
https://repository.uantwerpen.be/docman/irua/8ab96b/8733.pdf
E-info
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