This paper presents a tractable model of a firm that chooses both the scale and timing of its investment. The value-maximizing investment policy is lumpy, and sensitivity analysis shows that greater demand volatility is associated with the firm choosing to invest in larger increments, less...

Regulated firms are exposed to asset-stranding risk whenever allowed revenue depends on past capital expenditure: if demand falls far enough, past expenditure is unrecoverable. I show that such regulation induces firms to invest in more capital, but distorts the trade-off between investment...

Enormous public investment will occur as communities adapt to climate change. Much of this investment will be irreversible and the future benefits are currently uncertain. The real options embedded in adaptation projects are therefore potentially important and their existence needs to be...

This paper considers the extent to which the standard argument, that the disproportionate excess burden of taxation suggests the use of tax-smoothing in the face of future cost increases, is modified by uncertainty regarding the future. The role of uncertainty and risk aversion are examined...