We develop a model for determining the optimal timing and capacity choice of investment under floors and ceilings (collars). We study how a welfare maximizing finite-lived collar can be optimally designed. Our findings show that for a linear demand function, multiple collar arrangements are...

This paper presents a real options model to value the option to invest in a new project, whose value is contingent on two multiplicative stochastic factors behaving accordingly to correlated geometric Brownian motions. A general sensitivity analysis is conducted highlighting the importance of...