 Modelling investment and disinvestment decisions under competition, uncertainty and different market interventionsJan-Henning Feil and Oliver Musshoff Economic Modelling, 2013, vol. 35, issue C, 443-452 Abstract: A real options market model is developed, which derives the firms' optimal investment and disinvestment thresholds simultaneously in a competitive environment. It combines genetic algorithms and stochastic simulation, whereby vast modelling flexibility is gained. For example, different market interventions can be integrated and their effects on the firms' investment behaviour and the sectoral welfare can be assessed. The model is validated for its application to competitive markets by numerically replicating the optimality property of myopic planning. According to the results, production ceilings and investment subsidies are preferable to price floors because the welfare is less reduced for a given stimulation of the willingness to invest. Moreover, it is shown that not considering disinvestment options, which in reality often exist, can lead to incorrect valuations of investment strategies at firm level and incorrect policy impact analyses at macroeconomic level. Keywords: Investment and disinvestment; Real options; Competition; Policy impact analysis (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:443-452 DOI: 10.1016/j.econmod.2013.07.026 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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