Deregulated infrastructure industries exhibit stiff competition for market share. Firms may be able to limit the effects of competition by launching new projects in stages. Using a two-stage real options model, we explore the value of such flexibility. We first demonstrate that the value of...

The surge in demand for electricity in recent years requires that power companies expand generation capacity sufficiently. Yet, at the same time, energy demand is subject to seasonal variations and peak-hour factors that cause it to be extremely volatile and unpredictable, thereby complicating...

Private companies (PCs) in restructured infrastructure industries, e.g., energy and transportation, determine facility investment timing and sizing. Such decisions maximize the PC's expected profit (rather than social welfare) under uncertainty. By anticipating the PC's incentives, a...