General trigger values of optimal investment

Jurgen Vandenbroucke

Applied Economics Letters, 1999, vol. 6, issue 5, 287-290

Abstract: We consider a general real option model which allows finite values for all parameters influencing the value of waiting in case of uncertain and irreversible investment. We show that the traditional net present value rule and the commonly known Dixit-Pindyck approach are nested in the same general real option model and hence produce optimal investment decisions only in their specific scenario.

Date: 1999
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DOI: 10.1080/135048599353249

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