007 – The Role of the Abandonment Option in Strategic Resource Allocation: A Selected Review of the Literature 

João A. Ribeiro and João Costa-Filho

We review the most relevant contributions to the abandonment option since the late 1960’s. We begin by approaching the contributions to the literature before the emergence of the real options approach to capital investment decisions, and after, under a consistent real options approach, underlining the interactions between the option to abandon and other types of options. We move on to identify the methodologies adopted, and the business sectors/ types of investment projects where the abandonment option is more frequently studied. We also debate the strategic role of the abandonment solution in corporate divestitures and under a game-theoretical approach. Finally, we present some concluding remarks and propose how certain gaps found in the literature may constitute opportunities for future research.

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