Investment planning under uncertainty and flexibility: the case of a purchasable sales contract
No hay miniatura disponible
Fecha
Autores
Título de la revista
ISSN de la revista
Título del volumen
Editor
Resumen
Descripción
Investment decisions are not only characterised by irreversibility and uncertainty but
also by flexibility with regard to the timing of the investment. This paper describes
how stochastic simulation can be successfully integrated into a backward recursive
programming approach in the context of flexible investment planning. We apply this
hybrid approach to a marketing question from primary production which can be
viewed as an investment problem: should grain farmers purchase sales contracts which
guarantee fixed product prices over the next 10 years? The model results support the
conclusion from dynamic investment theory that it is essential to take simultaneously
account of uncertainty and flexibility.