Publication
Title
Finite project life and uncertainty effects on investment
Author
Abstract
This paper revisits the important result of the real options approach to investment under uncertainty, which states that increased uncertainty raises the value of waiting and thus decelerates investment. Typically in this literature projects are assumed to be perpetual. However, in today's economy firms face a fast-changing technology environment, implying that investment projects are usually considered to have a finite life. The present paper studies investment projects with finite project life, and we find that, in contrast with the existing theory, investments may be accelerated by increased uncertainty. It is shown that this particularly happens at low levels of uncertainty and when project life is short.
Language
English
Source (journal)
Journal of economic dynamics and control. - Amsterdam
Publication
Amsterdam : 2008
ISSN
0165-1889
Volume/pages
32:7(2008), p. 2191-2213
ISI
000257601800007
Full text (Publisher's DOI)
UAntwerpen
Faculty/Department
Research group
Publication type
Subject
Affiliation
Publications with a UAntwerp address
External links
Web of Science
Record
Identification
Creation 25.05.2009
Last edited 16.09.2017
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