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 state. We show that just before the time of a regime change, firms should act as if the worst-case scenario was about to happen, even if a good state is highly possible.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 33 (2009) Issue (Month): 10 (October) Pages: 1796-1807 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF