Can Greater Uncertainty Hasten Investment?
نویسنده
چکیده
This paper examines irreversible investment in a project with uncertain returns, when there is an advantage to being the first to invest, and externalities to investing when others also do so. Pre-emption decreases and may even eliminate the option values created by irreversibility and uncertainty. Externalities introduce inefficiencies in investment decisions. Pre-emption and externalities combined can actually hasten, rather than delay investment, contrary to the usual outcome. These facts demonstrate the importance of extending ‘real options’ analysis to include strategic interactions. JEL Classification: C73, D81, L13, O31.
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