title: The option to abandon: stimulating innovative groundwater remediation technologies characterized by technological uncertainty.
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.
authors: Hasselt University, Centre for Environmental Sciences, Agoralaan, Building D, B-3590 Diepenbeek, Belgium. Electronic address: tine.compernolle@uhasselt.be.
authors: T
authors: T
authors: Compernolle
authors: Hasselt University, Centre for Environmental Sciences, Agoralaan, Building D, B-3590 Diepenbeek, Belgium.
authors: S
authors: S
authors: Van Passel
authors: Tilburg University, Department of Econometrics & Operations Research and Center, Warandelaan 2, 5037 Tilburg, The Netherlands; ASML, De Run 6501, 5504 Veldhoven, The Netherlands.
authors: K
authors: K
authors: Huisman
authors: Tilburg University, Department of Econometrics & Operations Research and Center, Warandelaan 2, 5037 Tilburg, The Netherlands; University of Antwerp, Department of Economics, Prinsstraat 13, 2000 Antwerp, Belgium.
authors: P
authors: P
authors: Kort
mesh_terms: D003362:Cost-Benefit Analysis; D003661:Decision Support Techniques; D052918:Environmental Restoration and Remediation / Q000379:methods*; D060587:Groundwater / Q000737:chemistry*; D013672:Technology; D013997:Time Factors; D035501:Uncertainty; D014874:Water Pollutants, Chemical / Q000032:analysis
chemical_list: D014874:Water Pollutants, Chemical
keywords: Groundwater remediation; Investment decision; Real options; Technology; Uncertainty