Decision Making In Optimal Investment Timing And Investment Scale Under Uncertainty

Investment decision, namely the optimal allocation of resources, significantly influences the survival and development of enterprises. More and more modern enterprises are facing the problem which is how to make the right investment decision under the changeful economic situation and with many uncertain factors. The investment decision under economic globalization often presents the new characteristics of uncertainty, irreversibility, flexibility and competition. To make scientific, optimal investment decision for investment projects needs scientific investment decision-making theories and evaluation methods. It is a long-term and important task for both national and international theorists and practitioners about how to improve the capital investment decision-making level and build reasonable evaluation methods of investment decision.This dissertation first reviews the traditional analysis method of project investment decision, illustrating its defects, and then reviews the development of the Theory of Options, discussing the Real Option in the practice of investment. Because the traditional investment decision theory has unreasonable hypothesis, the evaluation of investment projects under uncertain environment cannot estimate the potential investment opportunities so that it often underestimate the value of the project to make the wrong decisions. The Real Option Theory is proved to be the appropriate theory for study of irreversible investment under uncertainty, but the basic Real Option Theory stresses on the investment timing and ignores the flexibility of enterprises in making decision on investment scale. In this dissertation, flexibility of investment scale is introduced, and having the assumption that the enterprises are faced with linear demand curve, treating product price and profit as exogenous and endogenous factors to play the role of stochastic process. Based on the Real Option Theory, this dissertation constructs a model for the enterprises to select optimal investment timing and optimal investment scale under the complete monopoly and expands the theory to sequential investment and under the competitive situation, analyzing the influence of uncertainty to enterprises'investment timing and investment scale. This dissertation enriches the Real Option Theory, extending the perspective of enterprises'investment decision-making, which is helpful for further enhance the rationality and accuracy of enterprises'investment decisions. Therefore, this dissertation has the actual academic value and application prospect in researching enterprises'investment decision-making under uncertainty.The innovations of this paper are mainly in the following aspects:First, this dissertation builds a model for the enterprises in concurrently selecting the optimal investment timing and making decision on investment scale under the complete monopoly.This model obtains the analytical expression of enterprises'optimal investment timing and optimal investment scale under constant and variable produce output. And through numerical simulation this model directly analyzes under different conditions the characteristics of optimal investment timing and decision making on investment scale which are affected by uncertainty. Then this paper redefines the rate of capacity utilization from the Real Options Theory, analyzing the influence of uncertainty to enterprises'rate of capacity utilization, illustrating two forms of excessive investment.Second, this paper builds the decision model when enterprise concurrently selects the optimal investment timing and optimal investment scale under the sequential investment.Based on the first innovation and analyzed the impacts of output in each stage to the price and profit according to the typical two-stage investment decision making, this study constructs the model of concurrent selection of optimal investment timing and optimal investment scale without restriction of investment scale and extends the model under the fixed investment scale, analyzing the effects of various investment proportions on investment value, analyzing the effects of uncertainty on investment timing and investment proportion of enterprises'each stage.Finally, based on the Option Game, this paper builds the decision model for enterprises'concurrent selection of optimal investment timing and optimal investment scale under the competitive condition.Based on the first innovation and Option Game, this paper establishes that in the uncertain competition and under the situations of enterprise's role is certain exogenously and endogenously, the Option Game model for enterprises'concurrent selection of optimal investment timing and optimal investment scale. When the enterprise's role is certain exogenously, the competitions do not change the leaders'decision but reduce the leader's investment value. While the enterprise's role is certain endogenously, the competitions reduce enterprise's option value and promote the enterprises to invest early on a smaller scale.