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Please use this identifier to cite or link to this item: http://hdl.handle.net/1942/17750

Title: The option to abandon: Stimulating innovative groundwater remediation technologies characterized by technological uncertainty
Authors: COMPERNOLLE, Tine
Huisman, K.
Kort, P.
Issue Date: 2014
Abstract: Many studies on technology adoption demonstrate that uncertainty leads to a postponement of investments by integrating a wait option in the economic analysis. The aim of this study however is to demonstrate how the investment in new technologies can be stimulated by integrating an option to abandon. Furthermore, this real option analysis not only considers the ex ante decision analysis of the investment in a new technology under uncertainty, but also allows for an ex post evaluation of the investment. Based on a case study regarding the adoption of an innovative groundwater remediation strategy, it is demonstrated that when the option to abandon the innovative technology is taken into account, the decision maker decides to invest in this technology, while at the same time it determines an optimal timing to abandon the technology if its operation proves to be inefficient. To reduce uncertainty about the effectiveness of groundwater remediation technologies, samples are taken. Our analysis shows that when the initial belief in an effective innovative technology is low, it is important that these samples provide correct information in order to justify the adoption of the innovative technology. (C) 2014 Elsevier B.V. All rights reserved.
Notes: [Compernolle, T.; Van Passel, S.] Hasselt Univ, Ctr Environm Sci, B-3590 Diepenbeek, Belgium. [Huisman, K.; Kort, P.] Tilburg Univ, Dept Econometr Operat Res & Ctr, NL-5037 Tilburg, Netherlands. [Huisman, K.] ASML, NL-5504 Veldhoven, Netherlands. [Kort, P.] Univ Antwerp, Dept Econ, B-2000 Antwerp, Belgium.
URI: http://hdl.handle.net/1942/17750
DOI: 10.1016/j.scitotenv.2014.07.019
ISI #: 000342245600009
ISSN: 0048-9697
Category: A1
Type: Journal Contribution
Validation: ecoom, 2015
Appears in Collections: Research publications

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