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.

Type

Journal article

Intellectual base

Primary research

Year

1986

Volume

101

Issue

4

Pages

707-727

Link

https://econpapers.repec.org/article/oupqjecon/v_3a101_3ay_3a1986_3ai_3a4_3ap_3a707-727..htm not authoritativefound

Cited from

information_theory

Cited by

1 citation across 1 artifact.

Each citation links to the sentence it supports in the citing article.

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.

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