Modigliani and Miller's Proposition III asserts that if a firm's projects are all similar, they should all be discounted at the same marginal cost of capital (MCC), which is also the firm's average cost of capital (ACC). However, when a firm expands by accepting a new project, its weight in...

The most commonly employed decision making paradigms are expected utility, prospect theory and regret theory. We examine the simple heuristic of maximizing the probability of being ahead, which in some natural economic situations may be in contradiction to all three of the above fundamental...