A model of entry–exit decisions and capacity choice under demand uncertainty
用期权价值模型研究需求不确定性下农业企业是否进入新兴市场及投资多少的决策，发现不确定性使投资比净现值规则更保守，进入和退出阈值差距更大。
Abstract Many investment decisions of agribusiness firms, such as when to invest in an emerging market or whether to expand the capacity of the firm, involve irreversible investment and uncertainty about demand, cost or competition. This paper uses an option-value model to examine the factors affecting an agribusiness firm’s decision whether and how much to invest in an emerging market under demand uncertainty. Demand uncertainty and irreversibility of investment make investment less desirable than the net present value (NPV) rule indicates. The inactive firm is more reluctant to enter the market when it takes into account demand uncertainty because it preserves the opportunity of making a better investment later. The active firm is more reluctant to abandon the investment because there is an option value of keeping the operation alive. There is a greater distance between the entry and exit thresholds under the option-value approach than under the NPV rule due to demand uncertainty. The results have implications for agribusiness decision-making.