The Value of Fighting Irreversible Demise by Softening the Irreversible Cost

descriptionPublicationkeyboard_double_arrow_right Article , Research , Other literature type , Preprint 01 Jan 2005 Netherlands, Italy, Italy English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: Sbuelz, Alessandro; Magis, Paul;

doi: 10.2139/ssrn.649261 , 10.1142/s021902490600372x

handle: 11562/304538 , 10807/22330

The Value of Fighting Irreversible Demise by Softening the Irreversible Cost

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Abstract

We study a novel issue in the real-options-based technology innovation literature by means of double barrier contingent claims analysis. We show how much a firm with the monopoly over a project is willing to spend in investment technology innovation that softens the irreversible cost of accessing the project before its irreversible demise. The answer depends on the project's characteristics and on the effectiveness demanded from technology innovation.

Countries

Netherlands, Italy, Italy

Related Organizations

University of Verona
Italy
Tilburg University
Netherlands
University of Milan
Italy
Catholic University of the Sacred Heart
Italy
Università Luigi Bocconi
Italy

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Keywords

Cost irreversibility; Demise irreversibility; Double barrier options; Technology innovation, double barrier options, Double barrier options;cost irreversibility;demise irreversibility;technology innovation, Production theory, theory of the firm, demise irreversibility, JEL-Classification: G12; G13; G31. Double barrier options; cost irreversibility; demise irreversibility; technology innovation., technology innovation, Derivative securities (option pricing, hedging, etc.), cost irreversibility, Double barrier options; cost irreversibility; demise irreversibility; technology innovation, Double barrier options, Double barrier options, cost irreversibility, demise irreversibility, technology innovation, Corporate finance (dividends, real options, etc.), jel: jel:G31, jel: jel:G12, jel: jel:G13

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