Government incentive impacts on private investment behaviors under demand uncertainty

This paper elaborates the impacts of government incentives on the private investment behaviors including the choices of investment timing, capacity, and price under demand uncertainty. The results suggest that revenue guarantee, concession period extension, lump-sum subsidy, and unit subsidy can induce timely investment. Revenue guarantee and concession period extension have limited impacts on the choices of capacity and price. Lump-sum subsidy leads to a smaller capacity and a higher price, while unit subsidy leads to a larger capacity and a lower price when comparing to the choices by a monopoly without government incentives.