Flexible Investment Strategies for Maximizing Returns Under Spatial Variation and Uncertainty in Beef Cattle Investment Decision-Making

Abstract

Designing the flexible investment strategies for maximizing returns under spatial variation and considering uncertainty in beef cattle investment decision-making are vital. Therefore, the objectives of the study were (i) To explore the real options and its values spatially for beef cattle investments in Turkey, and (ii) To evaluate the adequacy of government support for beef cattle investment spatially. Research data were collected from randomly selected 385 beef cattle farms by using questionnaires. The valuation of real options was assessed by using Binomial Valuation, Black-Scholes Method and Monte Carlo simulation. Tornado diagram was used for exploring sensitivity of decision variables for beef cattle investment. The results of the research showed that the classical Net Present Value (NPV) value was-200.82 thousand US $. The NPV values of the options of wait, expand, and input-output change for the beef cattle investment were US $102.37 thousand, 43.87 thousand, and 24.50 thousand, respectively. The research findings also showed that the value of real options and adequacy of government subsidies varied spatially. Based on the resuts of the sensitivity analysis, the most important variables affecting the investor's decision are carcass meat price, yield rate, capacity utilization rate, and fattening feed price, respectively. The research suggests that policy makers should consider the spatial distribution of investment subsidies and policies to the specific needs of different regions to increase efficiency of investment support policy. © 2025, Tarbiat Modares University. All rights reserved.