Investment under Uncertainty¶
Dixit, A., & Pindyck, R. (1994). Investment under Uncertainty. Princeton University Press.
Cited by¶
17 citations across 17 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Collingridge Dilemma
- From real-options finance into strategic planning, the machinery for pricing optionality is the formal version of curve-bending.
This sourceFoundational real-options analysis pricing the value of preserving the right to revise an irreversible commitment.
Supported in partVerified against the publisher's abstract
Supplies the foundational real-options framework — pricing the option value of waiting under irreversibility — but names neither strategic planning nor curve-bending.
“It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment.”
- From real-options finance into strategic planning, the machinery for pricing optionality is the formal version of curve-bending.
- Evidence-Latency Window
- A decision clock. An action must be committed by a deadline T, past which committing is prohibitive or impossible: a treatment deadline, a containment window, a takeoff slot, a shelf-life limit, a settlement date.
This sourceDevelops the real-options theory of irreversible commitment under uncertainty: a decision held open has option value, so the timing of an irreversible commitment relative to the arrival of information is the load-bearing variable — the decision-clock side of the two-clock geometry.
- A decision clock. An action must be committed by a deadline T, past which committing is prohibitive or impossible: a treatment deadline, a containment window, a takeoff slot, a shelf-life limit, a settlement date.
- Latent Realizable Capacity
- In psychology it is traits and abilities realized on tasks, latent attitudes surfacing under priming; in economics it is option value, contingent liabilities, and credit lines as latent borrowing power.
This sourceFoundational treatment of option value and real options — latent capacities to act under future contingencies valued as standing dispositions.
Supported in partVerified against the publisher's abstract
Dixit & Pindyck supply only the option-value strand of the claim — a standing capacity to act later, valued under uncertainty — not the contingent-liability, credit-line, priming or succession strands.
“This new approach to investment recognizes the option value of waiting for better (but never complete) information.”
- In psychology it is traits and abilities realized on tasks, latent attitudes surfacing under priming; in economics it is option value, contingent liabilities, and credit lines as latent borrowing power.
- Lazy Evaluation
- In decision-making and strategy it is the deliberate deferral of reversible-cost decisions until the information needed to make them is in hand, and real-options thinking that preserves the right (not obligation) to act later.
This sourceDevelops real-options reasoning that preserves the right (not obligation) to act later and defers reversible-cost decisions until information arrives.
Supported in partVerified against the publisher's abstract
The abstract grounds the option-value-of-waiting half of the claim but premises it on the irreversibility of investment, not on deferral of 'reversible-cost' decisions, and never states the right-not-obligation formula.
“This new approach to investment recognizes the option value of waiting for better (but never complete) information.”
- In decision-making and strategy it is the deliberate deferral of reversible-cost decisions until the information needed to make them is in hand, and real-options thinking that preserves the right (not obligation) to act later.
- Optimal Stopping Rule
- Drug discovery uses early go/no-go gates; military operations use commit-points; investment uses exit-rule discipline.
This sourceDevelops option-value/optimal-stopping discipline for irreversible investment, including exit and waiting rules under uncertainty.
Supported in partVerified against the publisher's abstract
Dixit & Pindyck's abstract supports the investment leg only, and only its waiting/option-value half: it never mentions drug-discovery go/no-go gates, military commit-points, or exit rules.
“This new approach to investment recognizes the option value of waiting for better (but never complete) information. It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment.”
- Drug discovery uses early go/no-go gates; military operations use commit-points; investment uses exit-rule discipline.
- Optionality
- It is a structured deferral, not a failure of choice, as Dixit and Pindyck (1994) emphasize in their canonical treatment of investment under uncertainty.
This sourceCanonical treatment of irreversible investment as a problem of optimal exercise of real options; rigorously distinguishes priced, intentional deferral from indecision and identifies the value of waiting for information.
Supported in partVerified against the publisher's abstract
Dixit & Pindyck's own abstract supports the value-of-waiting half (waiting carries option value), but says nothing about deferral not being a failure of choice or about indecision.
“This new approach to investment recognizes the option value of waiting for better (but never complete) information.”
- It is a structured deferral, not a failure of choice, as Dixit and Pindyck (1994) emphasize in their canonical treatment of investment under uncertainty.
- Reversibility and Irreversibility
- It separates actions into a spectrum from fully reversible (low restoration cost, high option value) to effectively irreversible (prohibitive restoration cost, options closed), as Dixit and Pindyck (1994) develop in their analysis of investment under uncertainty.
This sourceCanonical treatment of irreversible investment as a problem of optimal exercise of real options; rigorously distinguishes priced, intentional deferral from indecision and identifies the value of waiting for information.
Supported in partVerified against the publisher's abstract
The abstract supports irreversibility and the option value of waiting, but not the claim's spectrum of restoration costs or the assertion that fully reversible actions have high option value.
“stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made”
- It separates actions into a spectrum from fully reversible (low restoration cost, high option value) to effectively irreversible (prohibitive restoration cost, options closed), as Dixit and Pindyck (1994) develop in their analysis of investment under uncertainty.
- Reversibility Horizon
- A temporal threshold beyond which the economic or practical cost of reversal exceeds the cost of committing forward, transforming a nominally reversible decision into an effectively irreversible one, as Dixit and Pindyck (1994) develop in their canonical treatment of investment under uncertainty.
This sourceCanonical treatment of irreversible investment as a problem of optimal exercise of real options; rigorously distinguishes priced, intentional deferral from indecision and identifies the value of waiting for information.
Supported in partVerified against the publisher's abstract
The abstract backs the work's irreversibility and value-of-waiting frame, but states no temporal threshold at which reversal cost exceeds commitment cost, so it cannot carry the claim's defining clause.
“stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made”
- A temporal threshold beyond which the economic or practical cost of reversal exceeds the cost of committing forward, transforming a nominally reversible decision into an effectively irreversible one, as Dixit and Pindyck (1994) develop in their canonical treatment of investment under uncertainty.
- Stage Gate Process
- And real- option valuation ports from finance into staged R&D budgeting, connecting formal valuation theory to organisational practice.
This sourceReal-options valuation, porting from finance into staged R&D budgeting where staged commitment is a sequence of options.
Supported in partVerified against the publisher's abstract
Dixit and Pindyck supply the real-options-investment frame — option pricing theory from finance applied to firms' irreversible capital investment decisions — but not the specific transpose into staged R&D budgeting.
“It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment.”
- And real- option valuation ports from finance into staged R&D budgeting, connecting formal valuation theory to organisational practice.
Mechanisms¶
- Break-Even Activation Model
- That framing naturally supports staged commitment — funding to the next evidence checkpoint rather than all at once carries genuine option value under uncertainty
This sourceExplains that uncertainty gives staged or delayed investment genuine option value by preserving the ability to condition later commitment on new information.
- That framing naturally supports staged commitment — funding to the next evidence checkpoint rather than all at once carries genuine option value under uncertainty
- Controlled Consolidation Gate
- Closing a branch, dissolving a team, or merging two databases is far cheaper than re-creating what was there, so a "rollback path" ticked on paper often cannot actually be walked — the path back is not the mirror of the path in.
This sourceExplains that irreversible commitments cannot simply be undone to recover their expenditures, making reversal asymmetric with entry.
- Closing a branch, dissolving a team, or merging two databases is far cheaper than re-creating what was there, so a "rollback path" ticked on paper often cannot actually be walked — the path back is not the mirror of the path in.
- Lindy Decision-Horizon Review
- By committing to a bounded, hedged, reviewable horizon it captures the real value of durable infrastructure while keeping the option to leave — and that flexibility to stop is itself worth paying for under uncertainty.
This sourceTreats the ability to defer or abandon an investment as a valuable option under uncertainty.
- By committing to a bounded, hedged, reviewable horizon it captures the real value of durable infrastructure while keeping the option to leave — and that flexibility to stop is itself worth paying for under uncertainty.
- Option-Preserving Delay
- Delay pays when uncertainty is high, commitment is costly to reverse, and the passage of time genuinely resolves the unknown — the textbook conditions under which the option value of waiting is positive.
This sourceExplains that uncertainty, costly irreversibility, and the arrival of information while a decision remains delayable create the option value of waiting.
- Delay pays when uncertainty is high, commitment is costly to reverse, and the passage of time genuinely resolves the unknown — the textbook conditions under which the option value of waiting is positive.
- Real-Option Exercise Boundary
- Its strength is naming a value that simpler boundaries ignore: the option value of waiting under irreversibility, the reason a project that clears break-even can still be worth deferring rather than starting.
This sourceShows that under uncertainty and irreversibility, waiting has option value and can justify delaying an otherwise viable investment.
- Its strength is naming a value that simpler boundaries ignore: the option value of waiting under irreversibility, the reason a project that clears break-even can still be worth deferring rather than starting.
- Real-Options Cross-Check
- Flag irreversibility as a cost. Mark where committing now forecloses future choice; that foreclosure is a real cost the present-value figure omits.
This sourceShows that irreversible commitment exercises and destroys a valuable option to wait, making lost option value an opportunity cost omitted by the conventional NPV rule.
- Flag irreversibility as a cost. Mark where committing now forecloses future choice; that foreclosure is a real cost the present-value figure omits.
- Spare Capacity, Port, and Space Reservation
- Its strength is that it makes a whole class of future change cheap — a fit-out instead of a rebuild — and converts what would have been an irreversible constraint into an exercisable option.
This sourceShows how a fit-out instead of a rebuild can convert an irreversible constraint into an exercisable option.
- Its strength is that it makes a whole class of future change cheap — a fit-out instead of a rebuild — and converts what would have been an irreversible constraint into an exercisable option.
- Staged Capacity Pilot
- Its strength is that it replaces a modeled guess about agent response with observed behavior while keeping the downside bounded — the reversibility itself has real option value, because the freedom to stop after a cheap stage is worth more than a confident all-at-once launch under uncertainty.
This sourceTreats reversibility, staging, and the option to stop or abandon later investment as valuable under uncertainty because they limit committed downside while preserving future choice.
- Its strength is that it replaces a modeled guess about agent response with observed behavior while keeping the downside bounded — the reversibility itself has real option value, because the freedom to stop after a cheap stage is worth more than a confident all-at-once launch under uncertainty.
Verification¶
Does it exist? Confirmed. This work's DOI resolves to a registered record, which fixes its identity. That is all it fixes.
Does it back the claim? Read against the text for 8 of 17 citations: 8 supported in part. Each verdict is shown under its citation below, with what in the work backs the sentence.
Was it audited? Yes. A second, independent pass read the citation against the article text and recorded a verdict.
Support is checked per citation rather than per work — the same source can be cited soundly in one article and wrongly in another. Per-citation recording began recently, so a citation with no recorded check is a gap in the record rather than evidence it went unchecked.
See how references were verified.
Links previously used in the corpus¶
Before the registry existed this work was also linked 5 other ways.
- https://doi.org/10.1515/9781400830176 ×4
- https://press.princeton.edu/books/hardcover/9780691034102/investment-under-uncertainty ×4
- https://doi.org/10.2307/j.ctt7sncv ×2
- https://books.google.com/books/about/Investment_Under_Uncertainty.html?id=VahsELa_qC8C ×1
- https://www.jstor.org/stable/j.ctt7sncv ×1
Registry ID ref:b56ff6c0ea26 · see in the full table