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Complexity
Volume 2017, Article ID 2813816, 12 pages
https://doi.org/10.1155/2017/2813816
Research Article

Optimal Investment Timing and Size of a Logistics Park: A Real Options Perspective

1School of Traffic & Transportation Engineering, Central South University, Changsha, Hunan 410075, China
2Key Laboratory of Traffic Safety on Track of Ministry of Education, Central South University, Changsha, Hunan 410075, China
3College of Transportation and Logistics, Central South University of Forestry and Technology, Changsha, Hunan 410004, China

Correspondence should be addressed to Shuangyan Li; moc.361@585naygnauhsil

Received 2 July 2017; Accepted 7 November 2017; Published 5 December 2017

Academic Editor: Eulalia Martínez

Copyright © 2017 Dezhi Zhang et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper uses a real options approach to address optimal timing and size of a logistics park investment with logistics demand volatility. Two important problems are examined: when should an investment be introduced, and what size should it be? A real option model is proposed to explicitly incorporate the effect of government subsidies on logistics park investment. Logistic demand that triggers the threshold for investment in a logistics park project is explored analytically. Comparative static analyses of logistics park investment are also carried out. Our analytical results show that investors will select smaller sized logistics parks and prepone the investment if government subsidies are considered; the real option will postpone the optimal investment timing of logistics parks compared with net present value approach; and logistic demands can significantly affect the optimal investment size and timing of logistics park investment.