Optimal time-phasing of investment: a consolidated spurious model

Joan Pasqual () and Jose Antonio Tarrio

Applied Economics Letters, 1995, vol. 2, issue 10, 321-322

Abstract: Previous studies have presented a model to determine the profitability of delaying a project for a period. In the model it is implicitly assumed that no change affects the project during the period in question. This assumption is opposed to those usually made in dynamic models. Analysing the model, we see that the condition for the postponement of the project to be optimal is indistinguishable from the general profitability condition (net present value > 0): it is worth deferring unprofitable projects and not deferring the profitable ones. The problem these authors considered is thus non-existent, unless the model is modified to incorporate ad hoc assumptions

Date: 1995
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DOI: 10.1080/758518979

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