Optimal Investment in Interrelated Projects

Shasikanta Nandeibam, Marzia Raybaudi, Martin Sola

Research output: Contribution to journalArticlepeer-review


This paper addresses the effects in partial equilibrium models of relaxing one of the critical underlying assumptions of [A. K. Dixit & R. S. Pindyck (1994) Investment Under Uncertainty. Princeton: Princeton University Press] to investment under uncertainty: either the potential investor has access to a single project or can consider competing (or complementary) projects independently. This paper studies the investment decision of a multi-product monopolist where the projects exhibit interdependence between the cash flows of different products. We derive the optimal entry time for each product and show that the choice and investment timing differ from that suggested by the single project approach. It is well known that the decision to produce related goods simultaneously or sequentially crucially depends on their degree of substitutability or complementarity. We derive the optimal timing for the investment under this scenario.

Original languageEnglish
Article number2250031
JournalInternational Journal of Theoretical and Applied Finance
Issue number7-8
Early online date13 Jan 2023
Publication statusPublished - 13 Jan 2023


  • interrelated projects
  • Optimal investment

ASJC Scopus subject areas

  • Finance
  • Economics, Econometrics and Finance(all)


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