Insights on the Effect of Land Use Choice: The Perpetual Option on the Best of Two Underlying Assets

Hybrid or electric vehicles? A real options perspective

“…Proposition 1 extends previous findings by [7,3,1] allowing only a linear function to a case allowing a nonlinear function V R (x). The difference from problem (2) property of S AR,1 (t) ⊃ S A,1 (t) and S AR,2 (t) ⊂ S A,2 (t) supports the natural intuition that the potential replacement of the HV with the EV encourages (resp.…”

“…Figure 2 depicts the investment regions S AR (t) with ρ = −0.5, 0, and 0.5. It has been numerically verified in [7,6] that S A,i (t) grows monotonically with ρ. This is because a higher ρ decreases the value of the option to postpone the project choice and therefore hastens the investment in each project.…”

“…Throughout the paper, the subscript A denotes "Alternative choice." Problem (2) has been essentially investigated in [7,3] (also refer to Section 6 in [6]). 4 The optimal stopping time τ A (t) in problem (2) becomes:…”

“…option (studied by [7,3,12]) with a spread option (studied by [3,12,8]). 3 Indeed, the alternative project choice corresponds to the max-call option, while the replacement of HV with EV corresponds to the spread option.…”

Preemptive investment game with alternative projects

“…In fact, several papers have investigated a monopolist's investment decision involving several projects in a model with a bidimensional state variable. For example, [5] investigated land development timing with an alternative land use choice and [11] investigated timing in switching methods of nuclear waste disposal. 2 To the best of my knowledge, however, there are no papers that investigate preemptive investment involving several projects with a multidimensional state variable.…”