Investment under uncertainty in the mining industry : the state-contingent approach

Keddie, Aaron E. (2006). Investment under uncertainty in the mining industry : the state-contingent approach Honours Thesis, School of Economics, The University of Queensland.

       
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Author Keddie, Aaron E.
Thesis Title Investment under uncertainty in the mining industry : the state-contingent approach
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2006
Thesis type Honours Thesis
Total pages 71
Language eng
Subjects 14 Economics
Formatted abstract
Mining investment decisions are made in the face on uncertainty. Water is an essential input for mining production. Recent drought conditions in Australia have resulted in water becoming increasingly scarce and the sources of water less reliable. The state-contingent approach is used to model the infrastructure investment of the mining industry in the face of this uncertainty. The state-contingent approach differentiates the product by the state of nature realised, and therefore models production as a multi-output technology. This approach has recently re-emerged through the work of Chambers and Quiggin (2000).

The state-contingent production of the mining industry is modelled according to the methodology of Fuss and McFadden (1978). Fuss and McFadden present a model in which firms when constructing a plant design implicitly do so with a trade-off of flexibility versus efficiency. The model was empirically examined using the production function and the capital input demand function that is dual to the production function. The parameters of these functions are estimated to give a representation of the investment decisions of the mining industry under uncertainty.

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Document type: Thesis
Collection: UQ Theses (non-RHD) - UQ staff and students only
 
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Created: Tue, 30 Nov 2010, 09:30:35 EST by Ning Jing on behalf of The University of Queensland Library