This paper statistically tests the option theory of irreversible investment under uncertainty. Using contingent claims valuation, we derive the value of options to invest in capacity, where the projects are endogenous to the economic circumstances prevailing at the investment date. We then test...

Despite the progress that has been made in the measurement of productivity, there have been few attempts to cast emissions of bad outputs within a joint-production framework. This paper does so. It proposes an experimental framework that depends critically on the shadow price estimates of...