IDEAS home Printed from https://ideas.repec.org/a/wsi/ijtafx/v25y2022i07n08ns0219024922500315.html
   My bibliography  Save this article

Optimal Investment In Interrelated Projects

Author

Listed:
  • SHASIKANTA NAINDEBAM

    (Department of Economics, University of Bath, Bath BA2 7AY, UK)

  • MARZIA RAYBAUDI

    (��Department of Economics, Universidad Torcuato Di Tella, Avenida Figueroa Alcorta 7350, 1428 Buenos Aires, Argentina)

  • MARTIN SOLA

    (��Department of Economics, Universidad Torcuato Di Tella, Avenida Figueroa Alcorta 7350, 1428 Buenos Aires, Argentina)

Abstract

This paper addresses the effects in partial equilibrium models of relaxing one of the critical underlying assumptions of [A. K. Dixit & R. S. Pindyck (1994) Investment Under Uncertainty. Princeton: Princeton University Press] to investment under uncertainty: either the potential investor has access to a single project or can consider competing (or complementary) projects independently. This paper studies the investment decision of a multi-product monopolist where the projects exhibit interdependence between the cash flows of different products. We derive the optimal entry time for each product and show that the choice and investment timing differ from that suggested by the single project approach. It is well known that the decision to produce related goods simultaneously or sequentially crucially depends on their degree of substitutability or complementarity. We derive the optimal timing for the investment under this scenario.

Suggested Citation

  • Shasikanta Naindebam & Marzia Raybaudi & Martin Sola, 2022. "Optimal Investment In Interrelated Projects," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 25(07n08), pages 1-25, November.
    • Handle: RePEc:wsi:ijtafx:v:25:y:2022:i:07n08:n:s0219024922500315
    DOI: 10.1142/S0219024922500315
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0219024922500315
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0219024922500315?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Optimal investment; interrelated projects;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:ijtafx:v:25:y:2022:i:07n08:n:s0219024922500315. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/ijtaf/ijtaf.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.