Strategic Capital Budgeting: Asset Replacement Under Uncertainty

We consider a firm's decision to replace an existing production technology with a new, more cost-efficient one.Kulatilaka and Perotti [1998, Management Science] nd that, in a two-period model, increased product market uncertainty could encourage the firm to invest strategically in the new technology.This paper extends their framework to a continuous-time model which adds flexibility in timing of the investment decision.This flexibility introduces an option value of waiting which increases with uncertainty.In contrast with the two-period model, despite the existence of the strategic option of becoming a market leader due to a lower marginal cost, more uncertainty always increases the expected time to invest.Furthermore, it is shown that under increased uncertainty the probability that the firm finds it optimal to invest within a given time period always decreases for time periods longer than the optimal time to invest in a deterministic case.For smaller time periods there are contrary effects so that the overall impact of increased uncertainty on the probability of investing is in this case ambiguous.capital budgeting;uncertainty;investment;game theory

Real Options in an Aymmetric Duopoly: Who Benefits from your Competitive Disadvantage

This paper considers the impact of investment cost asymmetry on the value and optimal real option exercise strategies of firms under imperfect competition.Both firms have an opportunity to invest in a project enhancing (ceteris paribus) the profit now.We show that three types of equilibria exist and derive critical levels of cost asymmetry separating the regions in which they prevail.The presence of strategic interactions leads to counter-intuitive results.First, depending on the level of asymmetry, a marginal increase in the investment cost of the firm with the cost disadvantage can increase this firm's own value.Second, such a cost increase can result in a decrease in value of the competitor.Moreover, we discuss the welfare implications of the optimal exercise strategies and show that the presence of identical firms can result in a socially less desirable outcome than if one of the competitors has a significant investment cost disadvantage.Finally, we prove that profit uncertainty always delays investment, even in the presence of a strategic option of becoming the first investor.options;duopoly;capital budgeting;social welfare;investment

Investment Under Uncertainty and Policy Change

Existing real options literature provides relatively little insight into the impact of structural changes of the economic environment on the investment decision of the firm.We propose a method to model the impact of a policy change on investment behavior in which, contrary to the earlier models based on Poisson processes, uncertainty concerning the moment of the change can be explicitly accounted for.Moreover, probabilities of the change depend on the state of the dynamic system, what ensures the consistency of the action of the policy maker. We model the policy change as an upward jump in the (net) investment cost, which is, for instance, caused by a reduction in the investment tax credit.The firm has an incomplete information concerning the trigger value of the process for which the jump occurs.We derive the optimal investment rule maximizing the value of the firm.It is shown that the impact of trigger value uncertainty is non-monotonic: the investment threshold decreases with the trigger value uncertainty for low levels of uncertainty, while the reverse is true for high uncertainty levels.Finally, we present policy implications for the authority that result from the firm's value-maximizing behavior.investment;uncertainty;policy

Verifying termination and error-freedom of logic programs with block declarations

We present verification methods for logic programs with delay declarations. The verified properties are termination and freedom from errors related to built-ins. Concerning termination, we present two approaches. The first approach tries to eliminate the well-known problem of speculative output bindings. The second approach is based on identifying the predicates for which the textual position of an atom using this predicate is irrelevant with respect to termination. Three features are distinctive of this work: it allows for predicates to be used in several modes; it shows that block declarations, which are a very simple delay construct, are sufficient to ensure the desired properties; it takes the selection rule into account, assuming it to be as in most Prolog implementations. The methods can be used to verify existing programs and assist in writing new programs

Taylorism, targets and the pursuit of quantity and quality by call centre management

The paper locates the rise of the call centre within the context of the development of Taylorist methods and technological change in office work in general. Managerial utilisation of targets to impose and measure employees' quantitative and qualitative performance is analysed in four case-study organisations. The paper concludes that call centre work reflects a pardigmic re-configuration of customer servicing operations, and that the continuing application of Taylorist methods appears likely

Heat capacities of aqueous sodium hydroxide/aluminate mixtures and prediction of the solubility constant of boehmite up to 300 °C

A modified commercial (Setaram C80) calorimeter has been used to measure the isobaric volumetric heat capacities of concentrated alkaline sodium aluminate solutions at ionic strengths from 1 to 6 mol kg-1, with up to 40 mol.% substitution of hydroxide by aluminate, at temperatures from 50 to 300 °C and a pressure of 10 MPa. Apparent molar heat capacities for the mixtures, Cpφ{symbol}, derived from these data were found to depend linearly on the aluminate substitution level, i.e., they followed Young's rule. These quantities were used to estimate the apparent molar heat capacities of pure, hypothetical sodium aluminate solutions, Cpφ{symbol} ('NaAl(OH)4'(aq)). Slopes of the Young's rule plots were invariant with ionic strength at a given temperature but depended linearly on temperature. The heat capacities of ternary aqueous sodium hydroxide/aluminate mixtures could therefore be modelled using only two parameters in addition to those needed for the correlation of Cpφ{symbol} (NaOH(aq)) reported previously from these laboratories. An assessment of the standard thermodynamic quantities for boehmite, gibbsite and the aluminate ion yielded a set of recommended values that, together with the present heat capacity data, accurately predicts the solubility of gibbsite and boehmite at temperatures up to 300 °C

Neutron Diffuse Scattering from Polar Nanoregions in the Relaxor Pb(Mg1/3Nb2/3)O3

We have studied the neutron diffuse scattering in the relaxor PMN. The diffuse scattering appears around the Burns temperature (~620K), indicating its origin from the polar nanoregions (PNR). While the relative diffuse intensities are consistent with previous reports, they are entirely different from those of the lowest-energy TO phonon. Because of that, it has been considered that this TO mode could not be the ferroelectric soft mode. Recently, a neutron scattering study has unambiguously shown that the TO mode does soften on cooling. If the diffuse scattering in PMN originates from the soft mode condensation, then the atomic displacements must satisfy the center of mass condition. But, the atomic displacements determined from diffuse scattering intensities do not fulfill this condition. To resolve this contradiction, we propose a simple model in which the total atomic displacement consists of two components: $\delta_{CM}$ is created by the soft mode condensation, satisfying the center of mass condition, and, $\delta_{shift}$ represents a uniform displacement of the PNR along their polar direction relative to the surrounding (unpolarized) cubic matrix. Within this framework, we can successfully describe the neutron diffuse scattering intensities observed in PMN.Comment: 7 pages, 7 figures (Revised: 11-16-2001

Rapid Prototyping Using 3-D Welding

Rapid prototyping systems are based, almost exclusively on polymer, or paper materials. The dimensions of the parts produced are limited by the volume of the processing area within the machine, and parts tend to warp or distort due to shrinkage and lack of support. Also the mechanical properties of the part are restricted to those of the processable materials and thus, in many cases, required 'engineering properties' cannot be obtainedMechanical Engineerin