28. Modeling Ethanol Investment Decisions

This article reviews some of the papers my co-authors and I have written analyzing what factors affect the decision to invest in building new ethanol plants using a dynamic structural econometric model of the investment timing game. The results of our research will help determine which policies and factors can promote fuel-ethanol industry development. In Lin and Thome (Investment in corn-ethanol plants in the Midwestern United States: an analysis using reduced-form and structural models, Working paper, University of California at Davis, 2013), we estimate a model of the investment timing game in corn ethanol plants in the United States. This model follows my previous work estimating a structural econometric model of the multi-stage dynamic investment timing game in offshore petroleum production (Lin, 2013). In Lin and Yi (Ethanol plant investment in Canada: a structural model, Working paper, University of California at Davis, 2013; What factors affect the decision to invest in a fuel ethanol plant? a structural model of the ethanol investment timing game, Working paper, University of California at Davis, 2013), we estimate a model of the investment timing game in ethanol plants worldwide that allows for the choice among different feedstocks.