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Investing in Biogas: Timing, Technological Choice and the Value of Flexibility from Inputs Mix

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Author Info
Luca Di Corato ()
Michele Moretto ()

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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.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2729.

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Date of creation: 2009
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Handle: RePEc:ces:ceswps:_2729

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Related research
Keywords: factor proportions; technological choice; flexibility; real options; alternative energy source;

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Find related papers by JEL classification:
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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  5. António Afonso & Christophe Rault, 2009. "Spend-and-tax: A Panel Data Investigation for the EU," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  12. repec:cpr:ceprdp:7379 is not listed on IDEAS
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  17. Subhasish M. Chowdhury & Dan Kovenock J. & Roman M. Sheremeta, 2009. "An Experimental Investigation of Colonel Blotto Games," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  20. Francesco Menoncin & Paolo Panteghini, 2009. "Retrospective Capital Gains Taxation in the Real World," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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This page was last updated on 2009-11-3.

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