quantitative analysis of sustainable energy strategies in china this paper conducted quantitative study on china s sustainable energy strategies by using the econometric method gdp growth will be over 6 annually between 2005 and 2030 the continuation of rapid economic growth could result in a lot of difficulties for energy security environment protection and co2 emissions reductions for the sustainable development more comprehensive strategies should be adopted including improvement in energy efficiency with highest priority enhancing development of renewable energy and promoting structural adjustment in transport sector etc at the same time international cooperation such as establishing asia energy and environment agency towards asia community is also an important strategic option

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

the outlook for us oil dependence abstract oil dependence is defined as a dynamic problem of short and long run market power the potential monopoly power of an oil cartel depends on its market share and the elasticities of oil supply and demand while the economic vulnerability of oil consuming states depends most directly on the quantity of oil imported and the oil cost share of gross domestic product gdp of these factors only the market share of the organization of petroleum exporting countries opec cartel and the rate of growth of world oil demand are clearly different than they were 25 years ago opec still holds the majority of world oil and in the future will regain market share a hypothetical 2 year supply reduction in 2005 2006 similar in size to those of 1973 1974 or 1979 1980 illustrates the potential benefits to opec and harm to the us economy of a future oil price shock opec s revenues are estimated to increase by roughly 0 7 trillion while the us economy loses about 0 5 trillion strategic petroleum reserves seem ineffective against a determined multi year supply curtailment increasing the market s price responsiveness by improving the technologies of oil supply and oil demand can greatly reduce the costs of oil dependence each element of this interpretation of the oil dependence problem is well supported by previous studies this paper s contribution is to unite these elements into a coherent explanation and to point out the enormously important implications for energy policy

warrant exercise and bond conversion in competitive markets abstract we develop a theory of warrants held by competitive warrantholders not constrained to exercise their warrants as one block the theory also applies to convertible bonds held by competitive bondholders not constrained to convert their bonds as one block we prove that the warrant bond price in each of the competitive equilibria is less than or equal to the price in an economy with the block constraint and for at least one competitive equilibrium the warrant bond price equals the warrant bond price in the block constrained economy we illustrate the paths of competitive warrant exercise and bond conversion and conclude that under realistic assumptions they can be long

dynamic capacity planning using strategic slack valuation in this paper we analyze a particular aspect of capacity planning that is concerned with the active trading of production facilities for a homogenous product market we provide a theoretical rationale for the valuation and trading of these assets based on a metric of strategic slack we show that trading production assets with non additive portfolio profitability involves complex coordination with multiple equilibria and that these equilibria depend on the foresight in the planning horizon using the concept of strategic slack we have analyzed the dynamics of market structure the impact of asset trading on the level of production of the industry and to derive boundaries on the value of the traded assets moreover through computational learning the formulation is applied to a large oligopolistic electricity market showing that plant trading tends to lead to increased market concentration high prices lower production and a decrease in consumer surplus

investment under uncertainty and time inconsistent preferences abstract while standard real options models assume that agents possess a constant rate of time preference there is substantial evidence that agents are impatient about choices in the short term but are patient when choosing between long term alternatives we extend the real options framework to model the investment timing decisions of entrepreneurs with time inconsistent preferences the impact on investment timing depends on such factors as whether entrepreneurs are sophisticated or naive in their expectations regarding their future time inconsistent behavior and whether the payoff from investment occurs all at once or over time the model is extended to the case of a competitive equilibrium

inter relationships between spot and sticky price markets for crude oil a diagrammatic analysis abstract transfers of crude oil have generally involved both spot market transactions and sticky price transactions under longer term contractual arrangements or at official opec prices under normal conditions when the opec cartel has been functioning effectively the sticky price market tends to drive the spot market under other conditions like an international supply crisis or weak cohesion in opec spot and sticky prices may deviate considerably and the spot market drives the sticky price market

an analysis on the short term sectoral competitiveness impact of carbon tax in china abstract market based instruments particularly carbon tax have recently drawn the attention of chinese government by their cost effective contribution to the achievement of china s climate targets most of the recent policy proposals have focused on its long term impact however particularly for policy makers both long term and short term effects of carbon tax would be necessary when determining tax rates we provided a detailed analysis of short term impacts of carbon tax on sectoral competitiveness in this paper we divided china s economy into 36 sectors based on its 2007 input output table in order to examine the ratio of carbon tax added costs to sector gdp we were thus able to determine the impact level of a carbon tax on each sector we then divided the sectoral trade impact into domestic competitiveness with regards to foreign imported products and international competitiveness external to the chinese domestic market we found that a high tax level 100 yuan t co2 may necessitate compensatory measures to certain highly affected industries and that a low tax rate 10 yuan t co2 would generate few competitiveness problems for all industries and may therefore be considered as an appropriate starting point

a strategic analysis of sinking fund bonds abstract unlike most securities the pricing of sinking fund bonds is influenced by the distribution of ownership which summarizes the extent to which the market is cornered the effect of the distribution of ownership on the pricing of sinking fund bonds is examined by an explicit game in which the price obtained for bonds sold can depend upon the size of the investor s position this framework is used to contrast the valuation of sinking fund bonds with the valuation of amortizing bonds and straight debt we show that it is generally incorrect to view sinking fund bonds as being equivalent to serial bonds

analysis of the market penetration of clean coal technologies and its impacts in china s electricity sector abstract this paper discusses policy instruments for promoting the market penetration of clean coal technologies ccts into china s electricity sector and the evaluation of corresponding effects based on the reality that coal will remain the predominant fuel to generate electricity and conventional pulverized coal boiler power plants have serious impacts on environment degradation development of clean coal technologies could be one alternative to meet china s fast growing demand of electricity as well as protect the already fragile environment a multi period market equilibrium model is applied and an electricity model of china is established to forecast changes in the electricity system up to 2030s three policy instruments so 2 emission charge co 2 emission charge and implementing subsidies are considered in this research the results show that all instruments cause a significant shift in china s electricity structure promote ccts competitiveness and lead china to gain great benefit in both resource saving and environment improvement since resource security and environment degradation are becoming primary concerns in china policies that could help to gain generations market share of advanced coal based technologies such as ccts is suitable for the current situation of china s electricity sector

an equilibrium model of investment under uncertainty this paper analyzes the optimal investment decisions of heterogeneous rms in a competitive uncertain environment we characterize rms optimal investment strategy explicitly and derive a closed form solution for rm value we show that in the strategic equilibrium real option premia are signi cant as a result rms delay investment choosing optimally not to undertake some positive npv projects the model predicts that rm returns vary over the business cycle with returns negatively skewed during expansions but positively skewed in recessions

information revelation through option exercise in many real world situations agents must formulate option exercise strategies with imperfect information in such a setting agents may infer the private signals of other agents through their observed exercise strategies the building of an office building the drilling of an exploratory oil well and the commitment of a pharmaceutical company toward the research of a new drug all convey private information to other market participants this article develops an equilibrium framework for option exercise games with asymmetric private information many interesting aspects of the patterns of equilibrium exercise are analyzed in particular informational cascades where agents ignore their private information and jump on the exercise bandwagon may arise endogenously article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

an econometric study on china s economy energy and environment to the year 2030 abstract an integrated econometric model consisting of macroeconomic sub model energy sub model and environment sub model was developed and used to perform a long term simulation study for china in the coming 30 years the potential of gdp growth will be around 7 annually and the continuation of rapid economic growth could result in insurmountable difficulties for energy security air protection and co2 emission reductions for the sustainable development more comprehensive measures should be adopted including improvements in energy efficiency more rapid energy switching from coal to natural gas and renewable energy sources imposing carbon tax development of clean coal technology establishment of strategic petroleum stockpiling enforcement of air protection etc

continuous time methods in finance a review and an assessment i survey and assess the development of continuous time methods in finance during the last 30 years the subperiod 1969 to 1980 saw a dizzying pace of development with seminal ideas in derivatives securities pricing term structure theory asset pricing and optimal consumption and portfolio choices during the period 1981 to 1999 the theory has been extended and modified to better explain empirical regularities in various subfields of finance this latter subperiod has seen significant progress in econometric theory computational and estimation methods to test and implement continuous time models capital market frictions and bargaining issues are being increasingly incorporated in continuous time theory the roots of modern continuous time methods in finance can be traced back to the seminal contributions of merton 1969 1971 1973b in the late 1960s and early 1970s merton 1969 pioneered the use of continuous time modeling in financial economics by formulating the intertemporal consumption and portfolio choice problem of an investor in a stochastic dynamic programming setting merton 1973b also showed how such a framework can be used to develop equilibrium asset pricing implications thereby significantly extending the asset pricing theory to richer dynamic settings and expanding the scope of applications of continuous time methods to study problems in financial economics 1 within a span of about 30 years from the publication of merton s inf luential papers continuous time methods have become an integral part of financial economics indeed in certain core areas in finance such as e g asset pricing derivatives valuation term structure theory and portfolio selection continuoustime methods have proved to be the most attractive way to conduct research and gain economic intuition the continuous time approach in these areas has produced models with a rich variety of testable implications the econometric theory for testing continuous time models has made rapid strides in the last decade and has thus kept pace with the impressive progress on the theoretical front one hopes that the actual empirical investigations and estimation using the new procedures will follow suit soon

options on the minimum or the maximum of two risky assets analysis and applications this paper provides analytical formulas for european put and call options on the minimum or the maximum of two risky assets the properties of these formulas are discussed in detail options on the minimum or the maximum of two risky assets are useful to price a wide variety of contingent claims of interest to financial economists applications discussed in this paper include the valuation of foreign currency debt option bonds compensation plans risk sharing contracts secured debt and growth opportunities involving mutually exclusive investments

capacity expansion games with application to competition in power generation investments abstract we consider competitive capacity investment for a duopoly of two distinct producers the producers are exposed to stochastically fluctuating costs and interact through aggregate supply capacity expansion is irreversible and modeled in terms of timing strategies characterized through threshold rules because the impact of changing costs on the producers is asymmetric we are led to a nonzero sum timing game describing the transitions among the discrete investment stages working in a continuous time diffusion framework we characterize and analyze the resulting nash equilibrium and game values our analysis quantifies the dynamic competition effects and yields insight into dynamic preemption and over investment in a general asymmetric setting a case study considering the impact of fluctuating emission costs on power producers investing in nuclear and coal fired plants is also presented

technology choice under emission regulation uncertainty in international container shipping abstract we present a real options approach to evaluate technology and capacity choices under regulatory uncertainty our two phase regime switching model includes the option of investing in different technologies as well as a charter and layup option respectively for a base case version of this model we derive an analytical solution before studying the effect of regulatory uncertainty in a numerical extension that relaxes certain restrictive assumptions we then describe three regulatory regimes an emissions cap an emissions tax and a cap and trade market and compare how effectively each reduces emissions applying the model to maritime container shipping we develop insights on the optimal technology choice for reducing sox emissions we find that regulatory uncertainty can increase not only project values but also owned capacity from a regulatory perspective an emissions cap reduces emissions more effectively whereas an emissions tax reduces the cost of regulation the cap and trade market emerges in many respects as superior to an emissions tax finally we show that setting the emissions cap level or deciding on the level above which an emissions tax or emissions trade apply is critical because reduction in total industry emissions are not necessarily continuous

energy models for demand forecasting a review abstract energy is vital for sustainable development of any nation be it social economic or environment in the past decade energy consumption has increased exponentially globally energy management is crucial for the future economic prosperity and environmental security energy is linked to industrial production agricultural output health access to water population education quality of life etc energy demand management is required for proper allocation of the available resources during the last decade several new techniques are being used for energy demand management to accurately predict the future energy needs in this paper an attempt is made to review the various energy demand forecasting models traditional methods such as time series regression econometric arima as well as soft computing techniques such as fuzzy logic genetic algorithm and neural networks are being extensively used for demand side management support vector regression ant colony and particle swarm optimization are new techniques being adopted for energy demand forecasting bottom up models such as markal and leap are also being used at the national and regional level for energy demand management

timing of investments in oligopoly under uncertainty a framework for numerical analysis abstract we present a modeling framework for the analysis of investments in an oligopoly market for a homogenous commodity the demand evolves stochastically and the firms carry out investment projects in order to adjust their production cost functions or production capacities the model is formulated as a discrete time state space game where the firms use feedback strategies the firms are assumed to move sequentially to ensure a unique markov perfect nash equilibrium once the equilibrium has been solved monte carlo simulation is used to form probability distributions for the firms cash flow patterns and accomplished investments such information can be used to value firms operating in an oligopoly market an example of the model is given in a duopoly market the example illustrates the trade off between the value of flexibility and economies of scale under competitive interaction

determinants of china s energy imports an empirical analysis sustained economic growth in china has triggered a surge of energy imports especially oil imports this paper investigates the determinants of china s energy import demand by using cointegraiton and vecm techniques the findings suggest that in the long run growth of industrial production and expansion of transport sectors affect china s oil imports while domestic energy output has a substitution effect thus as the chinese economy industrializes and the automotive sector expands china s oil imports are likely to increase though china s domestic oil production has a substitution effect on imports its growth is limited due to scarce domestic reserve and high exploration costs it is anticipated that china will be more dependent on overseas oil supply regardless of the world oil price

asset level risk and return in real estate investments relatively little is known in the academic literature about the idiosyncratic returns of individual real estate investments though quite a few commercial properties command prices commensurate with the market values of small to medium publicly traded companies i use purchase and sale data from the national council of real estate investment fiduciaries ncreif to compute holding period price appreciation returns for commercial properties in stark contrast with liquid asset returns idiosyncratic drift and volatility estimates diverge as the holding period shrinks this puzzling phenomenon survives a variety of controls for vintage effects systematic risk heterogeneity and sample selection biases i derive an equilibrium search based illiquid asset pricing model which when calibrated fits the data very well thus a structural model of illiquidity seems crucial to a descriptive theory of real estate investment returns the model can be extended to other illiquid asset classes and used to price derivatives such as debt claims

the changing structure of the international oil industry implications for opec this paper examines the changes in international oil market structure observed in the 1980s and early 1990s and assesses possible effects on oil market conditions in the future and implications for opec it focuses on the trend toward a more vertical organization mainly resulting from substantial purchases of downstream assets by state owned oil companies in major oil producing countries while the gulf war prevented greater horizontal concentration of oil reserves it merely interrupted the trend toward vertical concentration in the international oil industry the vertical integration of only some of the opec members will cause a further divergence of goals within the organization resulting in a lower likelihood of opec regaining its former position as an effective cartel if the trend toward greater vertical concentration increases future oil prices will in part be affected by decisions made by vertically integrated firms

review of key international demand elasticities for major industrializing economies abstract this paper conducts a selective review of various estimates for energy demand responses focused specially upon lower income industrializing economies rather than richer mature nations it emphasizes recent trends from empirical studies that have been published after 2000 emphasis is placed on the five major emerging or transitional economies in brazil china india mexico and russia although other important nations like chile and south korea are also discussed when studies are available the review focuses attention on the long run responses to changes in prices and income after capital stock turnover has been completed the terminology often refers to elasticities or the percentage change in energy use divided by the percentage change in price or income holding constant all other factors that could influence energy use decisions estimates cover petroleum products natural gas and electricity although the available studies often ignore coal they also include the economy wide impacts real gdp to price changes most studies have focused upon household and transportation use of liquid fuels many fewer studies have investigated fuels used by industry or commerce or for electric generation based upon the available estimates price and income elasticities for liquid fuels are generally less than one unity for many countries and sectors except for the long run income effect for transportation purposes which can range widely by country between 0 24 and 1 75 while averaging 0 94 for all countries

option valuation of claims on real assets the case of offshore petroleum leases this paper extends financial option theory by developing a methodology for the valuation of claims on a real asset an offshore petroleum lease several theoretical and practical problems not present in applying option pricing theory to financial assets are addressed most importantly we show the necessity of combining option pricing techniques with a model of equilibrium in the market for the underlying asset petroleum reserves the advantages of this approach over conventional discounted cash flow techniques are emphasized the methodological development provides important insights for both company behavior and government policy promising empirical results are reported

opec and cheating revisiting the kinked demand curve abstract given a formal or tacit group agreement by an oligopoly such as opec it is still necessary to understand what pricing and output decisions individual members actually make the well known kinked demand curve model of oligopoly behaviour is useful in this regarg the model is usually applied to a price and market share fixing oligopoly in a deterministic world with appropriate modifications it can be applied to opec as a price fixing cartel with varying degrees of cohesion from 1973 1986 and as a quantity fixing cartel since 1986 operating in an uncertain world

option exercise games an application to the equilibrium investment strategies of firms under the standard real options approach to investment under uncertainty agents formulate optimal exercise strategies in isolation and ignore competitive interactions however in many real world asset markets exercise strategies cannot be determined separately but must be formed as part of a strategic equilibrium this article provides a tractable approach for deriving equilibrium investment strategies in a continuous time cournot nash framework the impact of competition on exercise strategies is dramatic for example while standard real options models emphasize that a valuable option to wait leads firms to invest only at large positive net present values the impact of competition drastically erodes the value of the option to wait and leads to investment at very near the zero net present value threshold copyright 2002 oxford university press

equilibrium and options on real assets in aggregate options on real and financial assets can have very different properties typically the good or service produced by a real asset has a finite elasticity of demand and developers have finite capacities also the supply of options can be limited and developers can be less than perfectly competitive in a subgame perfect nash equilibrium with these properties the optimal exercise policy and resulting values of developed and undeveloped assets are calculated explicitly the novel comparative statics are discussed in detail article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

real options and preemption under incomplete information abstract this paper introduces incomplete information and preemption into an equilibrium model of firms facing real investment decisions the optimal investment strategy may lie anywhere between the zero npv trigger level and the optimal strategy of a monopolist depending on the distribution of competitors costs and the implied fear of preemption our model implies that the equity returns of firms which hold real options and are subject to preemption will contain jumps and positive skewness

opec behavior a test of alternative hypotheses since interpretations of past and future oil price patterns depends on the model chosen the author tests and compares alternative theories of opec as a first step in validating the choice on any one model the results show that among opec countries the partial market sharing cartel model is the only model not rejected by at least some of the 11 members and gives the best explanation of production in comparison with 11 non opec countries the competitive model could not be rejected for 10 of the 11 non opec producers this raises the question of why if opec is a cartel friedman s predictions have not come true and introduces new questions for future research 19 references 3 tables

an empirical examination of the timing of land conversions in the presence of farmland preservation programs using a panel of parcel level data we estimate a hazard model and find strong evidence that the mere existence of an option to preserve farmland delays decisions to convert farmland to developed uses by about six years a reduction in median conversion time of 12 to 43 depending on parcel size where such delays allow local governments to improve infrastructure or implement stricter growth control measures benefits of a preservation option may be even more long term also increases in the variance of returns to development tended to slow conversion for parcels with all but the highest lot capacities copyright 2008 oxford university press

equilibrium with new investment opportunities abstract we develop a general equilibrium model where there are opportunities to abandon existing technologies and adopt new technologies we study how technologies change endogenously in an equilibrium and the effect of technological changes on the equilibrium we find that locally the equilibrium resembles that from cox et al 1985 econometrica 53 363 384 globally the equilibrium can be viewed as the equilibria from cir economies pasted together we also find that while the equilibrium consumption and security price processes are continuous the equilibrium return processes experience jumps at the time of technological changes

exit in duopoly under uncertainty this paper examines a declining duopoly where the firms must choose when to exit from the market the uncertainty is modeled by letting the revenue stream follow a geometric brownian motion we consider the markovperfect equilibrium in firms exit strategies with a low degree of uncertainty there is a unique equilibrium where one of the fi rms always exits before the other however when uncertainty is increased another equilibrium with the reversed order of exit may appear ruining the uniqueness whether this happens or not depends on the degree of asymmetry in the firm specifi cp arameters

incentives for banking megamergers what motives might regulators infer from event study evidence methodologically this paper frames the opportunity cost of any merger as the value of the alternative deals it precludes or defers this challenges the standard event study hypothesis that stock markets benchmark the value of a merger deal by the profits the partners would have earned in stand alone activity substantively the paper finds that megamergers in banking show two size related exceptions to the prototypical result that acquirer stock value tends to be unaffected or to fall when a merger is announced giant u s banking organizations gain value from becoming more gigantic and gain additional value when they absorb an in state competitor

the dynamic stability of opec s oil price mechanism abstract this paper examines opec s long lived mechanism which targets the oil price and adjusts the quality ceiling to meet the target the stability of this controversial mechanism is compared to that of two alternatives one requires quantity control without any price targeting and the other is a synthesis of quantity control and the opec mechanisms all three mechanisms passed the stability test and the two alternatives give rise to some interesting policy implications practically considerations which involve the availability of specific information make opec s mechanism the most appropriate in terms of achieved targeted revenues the paper also offers a convergence strategy that speeds up the achievement of targeted revenues under opec s current mechanism

open loop equilibria and perfect competition in option exercise games the investment boundaries defined by grenadier 2002 for an oligopoly investment game determine equilibria in open loop strategies as closed loop strategies they are not equilibria because any firm by investing sooner can preempt the investments of other firms and expropriate the growth options the perfectly competitive outcome is produced by closed loop strategies that are mutually best responses in this equilibrium the option to delay investment has zero value and the simple npv rule is followed by all firms the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

irreversible investment real options and competition evidence from real estate development abstract we examine the extent to which uncertainty delays investment and the effect of competition on this relationship using a sample of 1214 condominium developments in vancouver canada built from 1979 1998 we find that increases in both idiosyncratic and systematic risk lead developers to delay new real estate investments empirically a one standard deviation increase in the return volatility reduces the probability of investment by 13 percent equivalent to a 9 percent decline in real prices increases in the number of potential competitors located near a project negate the negative relationship between idiosyncratic risk and development these results support models in which competition erodes option values and provide clear evidence for the real options framework over alternatives such as simple risk aversion

shocks effects of macroeconomic variables on natural gas consumption in nigeria structural var with sign restrictions abstract this paper has examined the transmission of shocks from macroeconomic variables namely money supply inflation exchange rate and real gdp onto natural gas consumption using structural var svar model with sign restrictions the results revealed that both in the short run and long run natural gas consumption responds significantly to the shocks emanating from money supply and real gdp while its response to inflation shock is significant only in the short run but exchange rate shock is not significant however money supply has contributed greater proportion of the shocks followed by the real gdp inflation and exchange rate in the ordering of the variance decomposition the paper recommends that nigerian authorities adjust the monetary policy tools towards regulating the money supply and checking the inflation rate to ensure increased demand for natural gas and sustained economic growth on the response of natural gas consumption to the shock in the exchange rate since the shock is positive though insignificant it implies that depreciation of the exchange rate can discourage the demand for foreign exchange imports and boost the local production which would reciprocally lead to more natural gas consumption and improved growth in the country

warrant exercise dividends and reinvestment policy in this paper we examine sequential exercise strategies by warrantholders and the gain from hoarding warrants we analyze several obstacles to acquiring large blocks in order to exploit sequential strategies first we identify several reinvestment policies for which sequential exercise is not advantageous thereby eliminating the gain from hoarding however sequential exercise strategies may be advantageous for monopoly or oligopoly warrantholders even absent dividends because using exercise proceeds to repurchase stock or to expand the firm s scale increases the riskiness of an equity share second oligopoly warrantholders can receive a smaller warrant value than perfectly competitive warrantholders suggesting a potential cost to unsuccessful hoarding

developing real option game models by mixing concepts from both game theoretic analysis and real options theory an investment decision in a competitive market can be seen as a game between firms as firms implicitly take into account other firms reactions to their own investment actions we review two decades of real option game models suggesting which critical problems have been solved by considering game theory and which significant problems have not been yet adequately addressed we provide some insights on the plausible empirical applications or shortfalls in applications to date and suggest some promising avenues for future research

irreversible investment with price ceilings a model of irreversible investment in a competitive industry under demand uncertainty is developed in the absence of restrictions investment by itself will keep the price from rising above a natural ceiling that exceeds the long run average cost by an option value factor when a lower ceiling is imposed investment is triggered only by the observation of an even higher shadow price as the imposed ceiling is reduced to the long run average cost this shadow price goes to infinity and investment ceases completely because investment is depressed a tighter price ceiling generally leads to a higher long run average price

time to build option value and investment decisions abstract investment decisions and outlays are often made sequentially for example the rate at which construction proceeds is usually flexible and can be adjusted with the arrival of new information traditional discounted cash flow methods which treat the pattern of investment as fixed ignore this flexibility and understate the value of the project this paper uses contingent claims analysis to derive optimal decision rules and to value such investments we determine the effects of time to build opportunity cost and uncertainty on the investment decision for reasonable parameter values we show how a simple npv rule can lead to gross errors

an appropriate mechanism of fuels pricing for sustainable development abstract in this work the authors after a brief outlook concerning the markets of main energy commodities propose an alternative mechanism for fuel pricing consisted with a sustainable development technological change and technological pluralism costs and environmental issues are the benchmarks of the discussion developed the two mechanisms here proposed for fuel pricing try to encompass all these aspects stressing the scarcity concern not only under a merely based resource point of view but emphasizing also the technological variable as the first one to take into consideration in fact technology the mean by which resources are transformed into usable services energy forms is strictly linked to its limits above all productivity efficiency and environmental effects and cannot be any more considered only following the classical principles of the lowest cost of utilization without evaluating the other aspects related to the goals of sustainable development widely shared at the international level furthermore taking into consideration that some estimates of petroleum life expectancy calculate about 40 50 yr of consumption at current rates of demand a new mechanism to consider the right value of this resource and consequently all energy commodities is necessary without any pretension of exhaustion of the topic this work seems to be in line with this perspective trying to apply all these principles to price fuels

investment and competition this paper examines how industry structure affects corporate investment patterns real options theory shows that deferring irreversible investment in the face of uncertainty is valuable theory also shows that the value of waiting to invest falls if investment opportunities are contestable consistent with these theories we find that firms in monopolistic industries exhibit lower investment q sensitivity and are slower to invest than firms in competitive industries however we find that investment q sensitivity and investment speed are highest in oligopolistic industries suggesting that the value of investing strategically can outweigh the value of waiting indeed oligopolistic industries experience less entry and more exit than other industries