Investing in Biogas: Timing, Technological Choice and the Value of Flexibility from Inputs Mix

Luca Di Corato () and Michele Moretto

No 2729, CESifo Working Paper Series from CESifo

Abstract: In a continuous-time framework we study the technology and investment choice problem of a continuous co-digestion biogas plant dealing with randomly fluctuating relative convenience of input factor costs. Input factors enter into the productive process together mixed according to a given initial rule. Being inputs relative convenience stochastically evolving, a successive revision of the initial rule may be desirable. Hence, when the venture starts the manager may or may not install a flexible technology allowing for such option. Investment is irreversible and flexibility is costly. The problem is solved determining in the light of future prospects the optimal revision and then playing backward fixing the investment timing rule.

Keywords: factor proportions; technological choice; flexibility; real options; alternative energy source (search for similar items in EconPapers)
JEL-codes: C61 D24 Q42 (search for similar items in EconPapers)
Date: 2009
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Investing in biogas: Timing, technological choice and the value of flexibility from input mix (2011)
Working Paper: Investing in biogas: timing, technological choice and the value of flexibility from inputs mix (2011)
Working Paper: Investing in Biogas: Timing, Technological Choice and the Value of Flexibility from Inputs Mix (2009)
Working Paper: Investing in Biogas: Timing, Technological Choice and the Value of Flexibility from Inputs Mix (2009)
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