Real options analysis for land use management: Methods, application, and implications for policy

摘要: Discounted cash flow analysis, including net present value is an established way to land use and management investments which accounts for the time-value of money. However, it provides a static view assumes passive commitment investment strategy when real world decisions are characterised by uncertainty, irreversibility, change, adaptation. Real options analysis has been proposed as better valuation method under uncertainty where opportunity exists delay decisions, pending more information. We briefly review discounted methods in discuss their benefits limitations. then provide overview describe main analytical methods, summarize its application decisions. largely underutilized evaluating despite policy economic drivers, irreversibility sunk costs involved. New simulation offer potential overcoming current technical challenges implementation demonstrated with model used evaluate agricultural decision South Australia. conclude that considering option values future design will realistic assessment landholder making insights improved performance.