Modeling strategic investment decisions in spatial markets

Modeling strategic investment decisions in spatial markets

Markets for natural resources and commodities are often oligopolistic. In these markets, production capacities are key for strategic interaction between the oligopolists. We analyze how different market structures influence oligopolistic capacity investments and thereby affect supply, prices and rents in spatial natural resource markets using mathematical programing models. The models comprise ...

Modeling Ethanol Investment Decisions

Recently the support of biofuel production has been a politically sensitive topic. Politicians have pushed for support for fuel ethanol production as an environmentally friendly alternative to imported oil, as well as a way to boost farm profits and improve rural livelihoods. Several government policies actively promote ethanol production via tax incentives and mandates, and these policies are ...

Strategic Exercise of Real Options: Investment Decisions in Technological Systems

Viewing investment projects in new technologies as real options, this paper studies the effects of endogenous competition and asymmetric information on the strategic exercise of real options. We first develop a multi-period, game-theoretic model and show how competition leads to early exercise and aggressive investment behaviors and how competition erodes option values. We then relax the typica...

Strategic Investment Decisions: Theory and Practice in Estonia

To study the practice of investment decision-making in Estonia, first a written survey of 40 companies was carried out. More than half of respondents were found to use sophisticated (DCF-based) capital budgeting methods, which is a lower usage rate than that of large companies in western countries. This could be attributed to the short history of Estonian free market economy and the lack of app...

Learning in Investment Decisions: Evidence from Prediction Markets and Polls