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Title:Investing in biogas: timing, technological choice and the value of flexibility from inputs mix PDF Logo
Authors:Corato, Luca Di
Moretto, Michele
Issue Date:2009
Series/Report no.:CESifo working paper 2729
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.
Subjects:factor proportions
technological choice
flexibility
real options
alternative energy source
JEL:C61
D24
Q42
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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