Di Corato, Luca
- Department of Economics, Swedish University of Agricultural Sciences
Abstract
In a continuous-time framework we study the technology and investment choice problem of a continuous co-digestion biogas plant dealing with randomly fluctuating relative convenience of input factor costs. Input factors enter into the productive process together mixed according to a given initial rule. Being inputs relative convenience stochastically evolving, a successive revision of the initial rule may be desirable. Hence, when the venture starts the manager may or may not install a flexible technology allowing for such option. Investment is irreversible and flexibility is costly. The problem is solved determining in the light of future prospects the optimal revision and then playing backward fixing the investment timing rule
Keywords
factor proportions; technological choice; flexibility; real options; alternative energy source
Published in
CESifo Working Paper Series
2009, number: 2729
Publisher: CESifo Group Munich
SLU Authors
UKÄ Subject classification
Social Sciences
Economics and Business
Bioenergy
Permanent link to this page (URI)
https://res.slu.se/id/publ/28402