Michele Moretto

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We employ a certainty-equivalence framework to analyze the cost, value and pay/performance sensitivity of non-tradable options held by undiversified, risk-averse executives. We derive “Executive Value” lines, the risk-adjusted analogues to BlackScho9les lines. We show that distinguishing between “executive value” and “company cost” provides insight into(More)
We examine the effect of competition on investment decisions in an industry in which each firm has a completely irreversible investment opportunity and the product market has positive externalities for a small market size and negative externalities for a large market size. In the latter case, which corresponds to the traditional competitive industries,(More)
This paper considers the supplier’s strategic delivery lead time in a public procurement setting as the result of the firm’s opportunistic behavior on the optimal investment timing. In the presence of uncertainty on construction costs, we model the supplier’s option to defer the contract’s execution as a Put Option. We include in the model both the(More)
We study the competition to operate an infrastructure service by developing a model where …rms must report a two-dimensional sealed bid: the price to consumers and the concession fee paid to the government. Two bidding rules are considered in this paper. One rule consists of awarding the concession to the …rm that reports the lowest price. The other(More)
Which impact does ecological uncertainty have on agents’ decisions concerning domestic emissions abatement, physical investments, and R&D expenditures? How sensitive are the answers to these questions when we move from exogenous to endogenous technical change? To investigate these issues we modify the ETC-RICE model described in Buonanno, Carraro,(More)
We analyse the effects of different regulatory schemes (price cap and profit sharing) on a firm’s investment of endogenous size. Using a real option approach in continuous time, we show that profit sharing does not delay a firm’s start-up investment relative to a pure price cap scheme. Profit sharing does not necessarily affect total investment either, if(More)
To avoid the extremely high profit levels found in recent experience of public utilities’ regulation, some regulators have introduced a profit-sharing (PS) rule that revises prices to the benefit of consumers. However, in order to be successful, a PS rule should satisfy appropriate incentive conditions. In this paper, we study the incentive properties of a(More)