Regime uncertainty and optimal investment timing

• Published in: Journal of economic dynamics & control Vol. 33; no. 10; pp. 1796 - 1807
• Main Authors: Nishide, Katsumasa, Nomi, Ernesto Kazuhiro
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.10.2009; Elsevier; Elsevier Sequoia S.A
• Series: Journal of Economic Dynamics and Control
• Subjects: Economic models; Enterprises; Investment; Investment decision; Investment timing; Investment timing Real options Policy change Regime uncertainty; Modelling; Policy change; Probability; Real options; Real options analysis; Regime transition; Regime uncertainty; Strategic planning; Studies; Time; Uncertainty; G32; Policy change; D81; D92; Real options; Investment timing; Regime uncertainty

We construct a real options model in which a regime change is expected at a pre-determined future time and study the effects of regime uncertainty on a firm's strategic investment decision, taking into consideration the remaining time to the regime change and the probability of each regime stat...