{"title":"Entry and exit decisions with linear costs under uncertainty","authors":"Yongchao Zhang","doi":"10.1080/17442508.2014.939976","DOIUrl":null,"url":null,"abstract":"From the viewpoint of stochastic programming, we rigorously analyse entry and exit decisions of a project which were proposed by Dixit [A. Dixit, Entry and exit decisions under uncertainty, J. Polit. Econ. 97 (1989), pp. 620–638]. In this article, instead of assuming that the costs are constant in classical research, we assume that they are linear with respect to the price of the commodity produced by the project. Under this assumption, we obtain a condition which guarantees that investing in the project is worthless; besides, the project may be terminated when the commodity price is greater than a certain value. In contrast, there are no such results provided that the costs are constant. Moreover, we provide an explicit solution of entry and exit decisions if the project is worthy to be invested in.","PeriodicalId":49269,"journal":{"name":"Stochastics-An International Journal of Probability and Stochastic Processes","volume":"12 1","pages":"209 - 234"},"PeriodicalIF":0.8000,"publicationDate":"2015-03-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"6","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Stochastics-An International Journal of Probability and Stochastic Processes","FirstCategoryId":"100","ListUrlMain":"https://doi.org/10.1080/17442508.2014.939976","RegionNum":4,"RegionCategory":"数学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"MATHEMATICS, APPLIED","Score":null,"Total":0}
引用次数: 6
Abstract
From the viewpoint of stochastic programming, we rigorously analyse entry and exit decisions of a project which were proposed by Dixit [A. Dixit, Entry and exit decisions under uncertainty, J. Polit. Econ. 97 (1989), pp. 620–638]. In this article, instead of assuming that the costs are constant in classical research, we assume that they are linear with respect to the price of the commodity produced by the project. Under this assumption, we obtain a condition which guarantees that investing in the project is worthless; besides, the project may be terminated when the commodity price is greater than a certain value. In contrast, there are no such results provided that the costs are constant. Moreover, we provide an explicit solution of entry and exit decisions if the project is worthy to be invested in.
期刊介绍：
Stochastics: An International Journal of Probability and Stochastic Processes is a world-leading journal publishing research concerned with stochastic processes and their applications in the modelling, analysis and optimization of stochastic systems, i.e. processes characterized both by temporal or spatial evolution and by the presence of random effects.
Articles are published dealing with all aspects of stochastic systems analysis, characterization problems, stochastic modelling and identification, optimization, filtering and control and with related questions in the theory of stochastic processes. The journal also solicits papers dealing with significant applications of stochastic process theory to problems in engineering systems, the physical and life sciences, economics and other areas. Proposals for special issues in cutting-edge areas are welcome and should be directed to the Editor-in-Chief who will review accordingly.
In recent years there has been a growing interaction between current research in probability theory and problems in stochastic systems. The objective of Stochastics is to encourage this trend, promoting an awareness of the latest theoretical developments on the one hand and of mathematical problems arising in applications on the other.
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