Choosing an Investment Program among Interdependent Projects

Abstract

Investment decisions sometimes involve choice among available investment projects that are not mutually independent. That is, the pay-off, whether measured in profit, revenue, cost, productivity, or the like, to any one project may depend on the other projects undertaken with it. For example, suppose that, among the available investment projects are

• (a) that of building a concrete road in a certain distant and inaccessible part of the world, and

• (b) that of building a cement plant in that same region.

This paper was prepared under contract Nonr 1100 (16) NR, 047–026, Office of Naval Research.