The value of waiting to invest¶
McDonald, R., & Siegel, D. (1986). The value of waiting to invest. Quarterly Journal of Economics, 101(4), 707-727.
Cited by¶
1 citation across 1 artifact.
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Primes¶
- Reversibility and Irreversibility
- This asymmetry shapes timing: reversible decisions encourage action (experiment, learn, adjust); irreversible decisions encourage deliberation (gather information, model outcomes, commit only when high confidence), a relationship McDonald and Siegel (1986) formalized in their analysis of the value of waiting to invest in irreversible projects.
This sourceDerives the optimal timing of irreversible investment under stochastic payoffs: shows the value of deliberation (waiting) explicitly increases with irreversibility, while reversibility lowers the cost of acting promptly.
- This asymmetry shapes timing: reversible decisions encourage action (experiment, learn, adjust); irreversible decisions encourage deliberation (gather information, model outcomes, commit only when high confidence), a relationship McDonald and Siegel (1986) formalized in their analysis of the value of waiting to invest in irreversible projects.
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