Optimal investment under operational flexibility, risk aversion, and uncertainty

Abstract

Traditional real options analysis addresses the problem of investment under uncertainty assuming a risk-neutral decision maker and complete markets. In reality, however, decision makers are often risk averse and markets are incomplete. We confirm that risk aversion lowers the probability of investment and demonstrate how this effect can be mitigated by… (More)
DOI: 10.1016/j.ejor.2011.03.007

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