Works
- Investment under Uncertainty, 1994
In Tactics of Organizational Politics
Ideas
Real options and the value of waiting. Most investments are at least partly irreversible and made under uncertainty, so a firm that can delay holds an option, and committing now gives up the value of waiting for better information. The book treats such choices with the tools of financial options, which is why it is usually cited as the founding text of real options analysis in economics.
What it explains
Dixit and Pindyck explain why it can pay to learn cheaply before committing to anything hard to reverse. Inside organizations this is the logic of the trial run: test the reaction while the option to withdraw is still open.