The theory of real options is used to incorporate the influence of uncertainty on demographic decision-making. The decision to have children is formulated as an investment using portfolio theory. The timing of the decision to have a child is modelled as a real options decision, with uncertainty affecting a woman’s ability to exercise the doption to waitT in order to delay or space births. An in...

Two pervasive features of industries experiencing rapid technological progress are uncertainty (with regard to the technological feasibility and marketabilility of an innovation) and networks (the dense web of research alliances and joint ventures linking firms to each other). This paper connects the two disparate phenomena using the notion of real options. It visualizes firms as nodes and the ...

In this paper we develop a novel valuation model and methodology to value a pharmaceutical R&D project based on real options approach. The real options approach enables the possibility of optimally abandon the project before completion whenever the investment cost turns out to be larger than the expected net cash flow stream. On the other hand, the proposed model accounts for two different sour...

We present a model integrating dynamic moral hazard and real options. A risk averse manager can exert costly hidden effort to increase productivity growth of a firm. In addition, the risk neutral owners of the firm can irreversibly increase the firms capital stock. In contrast to the literature, moral hazard may accelerate or delay investment relative to the first best depending on the severity...