In this article we analyse the effects of different regulatory schemes (price cap and profit sharing) on a firm's investment of endogenous size. Using a real option approach in continuous time, we show that profit sharing does not affect a firm's start-up decision relative to a pure price cap...

In this paper we study the option to invest in a new airport, considering that the benefits of the investment behave stochastically. In particular, the number of passengers, and the cash flow per passenger are both assumed to be random. Additionally, positive and negative shocks are also...

Purpose: This study aims to examine the factors that form the commitment. Design/methodology/approach: The sampling technique used is proportionate stratified random sampling, with 100 respondents and the data collection happens in 2018. Methods of data analysis in this study uses multiple...

Let us suppose that presently unimagined is possible, that “the unexpected may happen” (Marshall, 1920, p. 347). Then “human decisions affecting the future, whether personal, political or economic, cannot depend on strict mathematical expectation since the basis for making such...

We study the combined effects of revenue and cost uncertainty as well competition on the timing optimization of investments in complementarity inputs for duopoly markets where either spillover-knowledge is allowed or where proprietary-knowledge holds. For some input-sequencing investment...

Accounting measures are traditionally considered not significant from an economic point of view. In particular, accounting rates of return are often regarded economically meaningless or, at the very best, poor surrogates for the IRR, which is held to be “the” economic yield. Likewise,...

Theory suggests a commitment to voluntary disclosure may improve firm investment over time. Our findings support this argument. We document that voluntary disclosure commitment is associated with the more profitable exercise of firm investment opportunities. Additionally, prior research...

This paper examines how industry-specific uncertainty affects firms' investments for varying degrees of asset irreversibility (i.e. the wedge between purchase price and liquidation value of an asset). To identify more or less irreversible capital goods, we exploit unique survey data on German...

This paper studies the value and optimal timing for investment in finite-lived monopolies, extending the literature on real option games by considering the cases of random and certain-lived monopolies. Under these settings, firms face the risk of demonopolization, that can occur as a random or a...