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...

Uncertainties as to future supply costs of nonrenewable natural resources, such as oil and gas, raise the issue of the choice of supply sources. In a perfectly deterministic world, an efficient use of multiple sources of supply requires that any given market exhausts the supply it can draw from...

We evaluate biodiversity in a real options framework, when the resources in use are substitutable. We examine optimal conservation decisions given that a biodiversity loss is irreversible and that future use values are uncertain. While species substitutability is generally believed to reduce the...

In existing papers on dynamic incentive contracts, the dynamic structure of the principal-agent relationship arises exclusively from the ability of the principal to learn about the hidden information over time. In this paper we deal with a different source of dynamics, which is considered...

We investigate investment behavior when there is asymmetry of information between owners (the principal) and managers (the agent). The model accepts the standard cost-of-adjustment model as a particular case and is directly compared with it. For all types, information asymmetry distorts the...

Afforestation is a cost-effective way for some countries to meet part of their commitments under the Kyoto Protocol and its eventual extensions. Credits for carbon sequestration can be mediated through markets for emissions permits. Both new and old forests are subject to pestilence and fire,...