The timing of capacity expansion investments in oligopoly under demand uncertainty

Since a flexibility value emerges in waiting to expand capacity, the impact of demand uncertainty in an oligopolistic industry leads to capacity expansion timing. The creation of growth opportunities is then the outcome of expanding capacity at optimal times. However, in our model different capacity size competitors interact not affecting each others, because assessing the impact of demand uncertainty on capacity expansion projects takes them to set up independently their optimal capacity expansion timing schedules. In equilibrium no firm expands capacity more often than any other. Under demand uncertainty simultaneity in capacity expansions is the only possible Markov Perfect Equilibrium

Port capacity expansion under real options approach: a case study in Brazil

Investments in port container terminals are sensitive to uncertainties. Public investments in infrastructure have been significantly reduced in the last decade in developing countries. The Brazilian government infrastructure investment was only 1.85 % of GDP in 2019, representing the lowest level in the last fifty years. Nonetheless, the regulatory framework of the port sector in Brazil has undergone significant changes over time, increasing the number of private port container terminal leases. The expansion capacity of the private port facilities is strongly linked to the demand uncertainty, which impacts the financial return to the long run. In this scenario, the uncertainty of global cargo transportation can discourage infrastructure investments in this class of project in Brazil. To overcome these issues, the financial modelling applying real options approach is better suited than the traditional valuation methods based on Discounted Cash Flow (DCF) analysis. The present study aims to value flexibilities of anticipating, or postponing, or interrupting investments of an existing operational port terminal in Brazil with expansion capacity under the demand uncertainty. The financial decision to invest in a port expansion is modeled by an American option. The results demonstrate that the investor adds significant value to the project by having the possibility to postpone investments. The proposed model presents the contribution of optimizing the decision of sequential expansions of capacity in port terminals, at any time and according to scenarios' revelation. In addition, the model allows the government authorities to review lease contracts, considering the relevance of timing to invest in project expansion decisions. The proposed model can also be extended to other infrastructure projects in emerging economies

Uncertainty and stepwise investment

We analyze the optimal investment strategy of a firm that can complete a project either in one stage at a single freely chosen time point or in incremental steps at distinct time points. The presence of economies of scale gives rise to the following trade-off: lumpy investment has a lower total cost, but stepwise investment gives more flexibility by letting the firm choose the timing individually for each stage. Our main question is how uncertainty in market development affects this trade-off. The answer is unambiguous and in contrast with a conventional real-options intuition: higher uncertainty makes the single-stage investment more attractive relative to the more flexible stepwise investment strategy

Optimal Representation of Anuran Call Spectrum in Environmental Monitoring Systems Using Wireless Sensor Networks

The analysis and classification of the sounds produced by certain animal species, notably anurans, have revealed these amphibians to be a potentially strong indicator of temperature fluctuations and therefore of the existence of climate change. Environmental monitoring systems using Wireless Sensor Networks are therefore of interest to obtain indicators of global warming. For the automatic classification of the sounds recorded on such systems, the proper representation of the sound spectrum is essential since it contains the information required for cataloguing anuran calls. The present paper focuses on this process of feature extraction by exploring three alternatives: the standardized MPEG-7, the Filter Bank Energy (FBE), and the Mel Frequency Cepstral Coefficients (MFCC). Moreover, various values for every option in the extraction of spectrum features have been considered. Throughout the paper, it is shown that representing the frame spectrum with pure FBE offers slightly worse results than using the MPEG-7 features. This performance can easily be increased, however, by rescaling the FBE in a double dimension: vertically, by taking the logarithm of the energies; and, horizontally, by applying mel scaling in the filter banks. On the other hand, representing the spectrum in the cepstral domain, as in MFCC, has shown additional marginal improvements in classification performance.University of Seville: Telefónica Chair "Intelligence Networks

Competition-driven evolution of organismal complexity

Non-uniform rates of morphological evolution and evolutionary increases in organismal complexity, captured in metaphors like "adaptive zones", "punctuated equilibrium" and "blunderbuss patterns", require more elaborate explanations than a simple gradual accumulation of mutations. Here we argue that non-uniform evolutionary increases in phenotypic complexity can be caused by a threshold-like response to growing ecological pressures resulting from evolutionary diversification at a given level of complexity. Acquisition of a new phenotypic feature allows an evolving species to escape this pressure but can typically be expected to carry significant physiological costs. Therefore, the ecological pressure should exceed a certain level to make such an acquisition evolutionarily successful. We present a detailed quantitative description of this process using a microevolutionary competition model as an example. The model exhibits sequential increases in phenotypic complexity driven by diversification at existing levels of complexity and the resulting increase in competitive pressure, which can push an evolving species over the barrier of physiological costs of new phenotypic features.Comment: Open PDF with Acrobat to see movies, 22 pages, 9 figure

Coordination and Cooperation in Investment Timing with Externalities ?

We characterize sequential (preemption) and simultaneous (coordination) equilibria, as well as joint-value maximizing (cooperation) solutions, in a model of investment timing allowing for externalities in both flow pro...ts and investment costs. For two ex-ante symmetric ...rms, either preemption or attrition occur depending on the size of the investment externality. Coordination is less likely with more discounting, as in a repeated game, and more likely with higher growth and volatility. Optimal cooperation involves either monopoly or duopoly investment, the latter being either symmetric or asymmetric. Finally, these characterizations are validated by applications to standard speci...cations of capacity accumulation and of R&D investment. In the former setup, coordination is likelier if installed capacities and lumpy investments are both large. With R&D input choices, if investment synergies are large, coordination and cooperation result in the same outcomes.Investment Timing; Real Options; Simultaneous Equilibrium; Joint-Value Maximization; Cooperation; Investment Externalities

Transcritical Carbon Dioxide Charge-Discharge Energy Storage with Integration of Solar Energy

New and improved energy storage technologies are required to overcome non-dispatchability, which is the main challenge for the successful integration of large shares of renewable energy within energy supply systems. Energy storage is proposed to tackle daily variations on the demand side, i.e., storing low-price energy during off-peak or valley periods for utilization during peak periods. Regarding electrical energy storage, several technologies are available with different potentials for scalability, density, and cost. A recent approach for grid-scale applications is based on transcritical carbon dioxide charge and discharge cycles in combination with thermal energy storage systems. This alternative to pumped-hydro and compressed air energy storage has been discussed in scientific literature, where different configurations have been proposed and their efficiency and costs calculated. The potential of the concept has been demonstrated to be an economical alternative, including hybrid concepts with solar thermal storage. Even at low temperatures, the addition of solar energy has proved to be cost effective. This paper explores the effect of introducing solar-based high temperature heat on the performance of different configurations of “Transcritical carbon dioxide ‒ thermal energy storage system” cycles. A base-cycle with 8-hour discharge time is compared with different layouts. Discussions include details on the models, parametric analyses -including solar technology alternatives-, and simulation results. Round trip efficiency of the base case, without solar support and at pressure ratio of 9.4, is 52%. When solar input is considered, the efficiency is above 60%, increasing the turbine inlet temperature to 950 K. Estimated levelized cost of electricity values are in the range of pumped hydro and compressed air energy storage, 90-140 USD/MWh in agreement with other works on this thermal storage technology. The global analysis shows clear advantages for advancing in the study and definition of this technology for exploitation of synergies at different power ranges, integrated with mid/high temperature solar power plants and with smaller-scale renewable installations.Unión Europea. Fondo Europeo de Desarrollo Regional SOE1 / P3 / P0429E