Reference : Where and When to Invest in Infrastructure
Scientific journals : Article
Business & economic sciences : Economic systems & public economics
Where and When to Invest in Infrastructure
Brueckner, Jan K [University of California]
Picard, Pierre M mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Regional Science and Urban Economics
Elsevier Science
Yes (verified by ORBilu)
[en] This paper analyzes an irreversible “where-and-when” investment decision, in which a government must decide not only when to invest in income-increasing infrastructure but also where to make the investment, doing so under imperfect observability of the investment gains. The two models considered in the paper differ in the source of the imperfection. In the signal
model, the imperfection comes from imperfect observability of initial income gains from the investment, while in the option model, it comes from the stochastic nature of the income gains
in the second period. In addition to providing the first treatment of this type of problem, the
analysis shows that the influences of underlying parameters on whether or not the government
waits to invest are similar in the two models.

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