TY - JOUR
T1 - Optimal proportion decision-making for two stages investment
AU - Liu, Yu Hong
AU - Jiang, I. Ming
N1 - Funding Information:
The authors would like to thank the anonymous referees, and 88th annual conference (Western Economic Association International) participants for their helpful comments. Professor Liu and Jiang acknowledge financially (partially) support by the Ministry of Science and Technology (National Science Council) of the Republic of China, Taiwan (MOST 103-2410-H-006-034 and NSC 102-2914-I-155-010-A1).
Funding Information:
The authors would like to thank the anonymous referees, and 88th annual conference (Western Economic Association International) participants for their helpful comments. Professor Liu and Jiang acknowledge financially (partially) support by the Ministry of Science and Technology (National Science Council) of the Republic of China, Taiwan (MOST 103-2410-H-006-034 and NSC 102-2914-I-155-010-A1).
Publisher Copyright:
© 2018 Elsevier Inc.
PY - 2019/4
Y1 - 2019/4
N2 - In two-stage investment decision-making, an enterprise focuses not only on the choice of optimal investment timing, but also on the investment proportion of each stage. By considering the typical two-stage investment decision-making, we analyze the effect of output quantity on price and profit of each stage and construct the model under uncertainty, including the optimal investment timing and proportion. In some situations the investment project is set up with a certain maximum capacity, and this fixed project capacity becomes an upper boundary of its later output that cannot be adjusted in the future. Compared to lumpy investment, this study presents that two-stage investment decision-making allows the enterprise to enter the first stage earlier and the second stage later when choosing the proper investment proportion, which may enhance the investment value. Under increasing uncertainty, the enterprise will enter the first-stage investment later with a larger proportion, and the effect from the change in investment proportion on investment value will decrease.
AB - In two-stage investment decision-making, an enterprise focuses not only on the choice of optimal investment timing, but also on the investment proportion of each stage. By considering the typical two-stage investment decision-making, we analyze the effect of output quantity on price and profit of each stage and construct the model under uncertainty, including the optimal investment timing and proportion. In some situations the investment project is set up with a certain maximum capacity, and this fixed project capacity becomes an upper boundary of its later output that cannot be adjusted in the future. Compared to lumpy investment, this study presents that two-stage investment decision-making allows the enterprise to enter the first stage earlier and the second stage later when choosing the proper investment proportion, which may enhance the investment value. Under increasing uncertainty, the enterprise will enter the first-stage investment later with a larger proportion, and the effect from the change in investment proportion on investment value will decrease.
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U2 - 10.1016/j.najef.2018.08.002
DO - 10.1016/j.najef.2018.08.002
M3 - Article
AN - SCOPUS:85051709095
SN - 1062-9408
VL - 48
SP - 776
EP - 785
JO - North American Journal of Economics and Finance
JF - North American Journal of Economics and Finance
ER -