We consider optimal investment behavior for a firm facing both technological and economic uncertainty, in the context of a research project with unpredictable outcomes. The optimal investment strategy, in the form of a pair of trigger points for investment and abandonment, is derived. As in...

based on Chari and Jagannathan (1988), this paper models information-induced and "pure-panic"runs in an environment of risk-aves agents. In this framework, deposits are needed to provide insurance against investors'unexpected demand for liquidity and therefore, a role for financial intermediary...

In this paper, I first provide a unifying approach to Mean-Variance analysis and Value at Risk, which highlights their similarities and differences. Then I use it to explain how fund managers can take investment decisions within the well-known Mean-Variance allocation framework that satisfy the...

Profit maximization is not a well defined objective when markets are incomplete. Several criteria of investment choice have therefore been put forward in the literature, some of which crucially hinge upon aggregation of shareholders' preferences, as is the case with the criteria proposed by...

In this paper, we compare the attitude towards current risk of two expected-utility-maximizing investors that are identical except that the first investor will live longer than the second one.

A firm-level sequential investment model is developed to analyze how uncertainty about environmental policies in the future affects current investment decisions. Three specific policies are considered -- a pollution tax, an investment credit in the presence of liquidity constraints, and a...

In this article we study the effect of uncertainty on an entrepreneur who must choose the capacity of his business before knowing the demand for his product.