D’Alpaos C., Moretto M. (2013).
Uncertainty over future demand, increasing operating costs and regulation make de facto investment timing and operational decisions in landfill construction and management more crucial than ever. In this uncertain scenario, landfill operators have often to decide whether to make an irreversible capital outlay and invest in an over-sized facility or to proceed with sequential investments in order to adapt e.g. to changes in demand and hedge risk. In this paper we model the investment strategy of a private operator who has discretion over the timimg of subsequent investments and the sizing of a landfill. In such a case investment can actually be seen as a portfolio of growth options. We determine the value of managerial flexibility to decide the timing and capacity sizing of a landfill according to the Real Option Approach.