Irreversibility, uncertainty, and investment¶
Pindyck, R. S. (1991). Irreversibility, uncertainty, and investment. Journal of Economic Literature, 29(3), 1110-1148.
Cited by¶
1 citation across 1 artifact.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Reversibility and Irreversibility
- Instead of asking "Should we commit to this strategy?" (a question inviting debate about rightness), the prime asks "Should we preserve reversibility, or are the efficiency and credibility gains from irreversible commitment worth the loss of adaptability?"—a tradeoff Pindyck (1991) systematizes in showing how irreversibility shifts the calculus of when to commit versus when to wait.
This sourceSurveys the economics of irreversible investment: shows how irreversibility shifts the calculus of when to commit, explicitly tying the efficiency-credibility gains of irreversible commitment against the option value lost when adaptability is foreclosed.
Supported in partVerified against the work's full text
Pindyck's survey rests on two features of investment: expenditures are largely irreversible, since “the firm cannot disinvest” and they count as sunk costs, yet they can be delayed, “giving the firm an opportunity to wait for new information about prices, costs, and other market conditions before it commits resources”. The opportunity is treated as a call option, invest now against wait and invest if the price rises, which is the commit-versus-wait calculus the sentence attributes to the work.
“There may be a cost to delay -.therisk of entry by other firms, or simply foregone cash flows -- butthis cost must be weighed against the”
- Instead of asking "Should we commit to this strategy?" (a question inviting debate about rightness), the prime asks "Should we preserve reversibility, or are the efficiency and credibility gains from irreversible commitment worth the loss of adaptability?"—a tradeoff Pindyck (1991) systematizes in showing how irreversibility shifts the calculus of when to commit versus when to wait.
Verification¶
Does it exist? Not checked yet. This entry carries no identifier to resolve. It was extracted from the citation as written in the article, normalized, and deduplicated against the rest of the registry.
Does it back the claim? Read against the text for 1 of 1 citation: 1 supported in part. Each verdict is shown under its citation below, with what in the work backs the sentence.
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.
Registry ID ref:cfd5d6809776 · see in the full table