Applying real options in investment decisions relating to environmental pollution |
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| Authors: | Tyrone T Lin Chuan-Chuan Ko Hsin-Ni Yeh |
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| Affiliation: | 1. Department of International Business, National Dong Hwa University, 1, Sec. 2, Da Hsueh Road, Shou-Feng, Hualien 974, Taiwan, ROC;2. Department of International Trade, Jin Wen Institute of Technology, Taiwan, ROC;3. Graduate School of Management, Ming Chuan University, Taiwan, ROC |
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| Abstract: | This study focuses on how to assess the optimal environmental investment decisions under economic and ecological uncertainty, and establishes the continuous time model using the real option approach to optimize environmental pollution policy. Unlike traditional cost benefit analysis, this work extends the model of Pindyck, R.S., 2002. Optimal timing problems in environmental economics. Journal of Economic Dynamics and Control 26(9–10), 1677–1697], and attempts to identify the storage threshold of pollution stocks and the optimal timing for implementing environmental pollution decisions. |
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| Keywords: | Environmental pollution Real options Decision making |
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