Real options and the Jorgensonian user cost of capital

Oscar Gutiérrez
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Oscar Gutiérrez: Centro Politécnico Superior Universidad de Zaragoza

Investigaciones Economicas, 2005, vol. 29, issue 3, 625-630

Abstract: Dixit and Pindyck (1994) claim that the Jorgensonian rule of investment (Jorgenson, 1963) does not hold in uncertain settings. This note shows that the validity of that claim depends crucially on the particular process chosen to describe the economic uncertainty. In fact, the Jorgensonian rule of investment holds in other real options models.

Keywords: Real options; user cost of capital; free-boundary; gamma process (search for similar items in EconPapers)
JEL-codes: D92 G31 (search for similar items in EconPapers)
Date: 2005
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