This paper addresses the problem of irreversibility of investments, a topic related to the recently evolving "real options" literature. In the presence of alternatives, the opportunity to invest in a large "irreversible" project with uncertain benefits and costs is similar to a financial "call" option. In exercising this option one forgoes the potential gains from postponing the investment decision. Conventional economic appraisal techniques ignore...
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INFORMACIÓN
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1991/08/31
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Documento de trabajo departamental
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11330
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1
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1
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2010/07/01
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Decision making under uncertainty - an option valuation approach to power planning
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discount rate