Related papers: Investment Timing and Technological Breakthroughs
Even in the face of deteriorating and highly volatile demand, firms often invest in, rather than discard, aging technologies. In order to study this phenomenon, we model the firm's profit stream as a Brownian motion with negative drift. At…
Knowledge spillovers occur when a firm researches a new technology and that technology is adapted or adopted by another firm, resulting in a social value of the technology that is larger than the initially predicted private value. As a…
We present a macro-finance model with innovation and knowledge spillover. Skilled agents engage in R&D activities (establish firms) or work in the knowledge-intensive sector. Unskilled agents work in the traditional sector. Knowledge…
This paper considers the problem of consumption and investment in a financial market within a continuous time stochastic economy. The investor exhibits a change in the discount rate. The investment opportunities are a stock and a riskless…
This paper presents a new condition for the existence of optimal stationary policies in average-cost continuous-time Markov decision processes with unbounded cost and transition rates, arising from controlled queueing systems. This…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
This paper introduces a method for linking technological improvement rates (i.e. Moore's Law) and technology adoption curves (i.e. S-Curves). There has been considerable research surrounding Moore's Law and the generalized versions applied…
We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of…
This paper studies optimal consumption and saving decisions under uncertainty about the transition dynamics of the economic environment. We consider a general optimal savings problem in which the exogenous state governing discounting,…
A decision-maker periodically acquires information about a changing state, controlling both the timing and content of updates. I characterize optimal policies using a decomposition of the dynamic problem into optimal stopping and static…
We analyze the optimal strategy for a government to promote large-scale investment projects under information frictions. Specifically, we propose a model where the government collects information on probability of each investment and…
In dynamic capital structure models with an investor break-even condition, the firm's Bellman equation may not generate a contraction mapping, so the standard existence and uniqueness conditions do not apply. First, we provide an example…
Consider a dynamic decision-making scenario where at every stage the investor has to choose between investing in one of two projects or gathering more information. At each stage, the investor may seek counsel from one of several…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
In this paper we analyse a dynamic model of investment under uncertainty in a duopoly, in which each firm has an option to switch from the present market to a new market. We construct a subgame perfect equilibrium in mixed strategies and…
This paper proposes and studies an optimal dividend problem in which a two-state regime-switching environment affects the dynamics of the company's cash surplus and, as a novel feature, also the bankruptcy level. The aim is to maximize the…
We study investment strategy in different models of financial markets, where the investors cannot reach a perfect knowledge about available assets. The investor spends a certain effort to get information; this allows him to better choose…
We study the problem of a profit maximizing electricity producer who has to pay carbon taxes and who decides on investments into technologies for the abatement of carbon emissions in an environment where carbon tax policy is random and…
This paper provides a general characterization of subgame perfect equilibria for strategic timing problems, where two firms have the (real) option to make an irreversible investment. Profit streams are uncertain and depend on the market…
We develop a complete analysis of a general entry-exit-scrapping model. In particular, we consider an investment project that operates within a random environment and yields a payoff rate that is a function of a stochastic economic…