In this paper we use a contingent claims approach to value pilot project investments that help reduce idiosyncratic uncertainty with respect to the value of the project's commercial phase before the decision to introduce the product into the market place is made. In our model, both radable...

We introduce a general discrete time dynamic framework to value pilot project investments that reduce idiosyncratic uncertainty with respect to the final costs of a project. The model generalizes different settings introduced previously in the literature by incorporating both, market and...