Investment and abandonment decisions in the presence of imperfect aggregation of information

Arbeitspapier

The traditional marshallian rule of investing when the value of the investment is greater than its installment cost is modified in the presence of irreversibility and uncertainty, giving rise to an option component. Additionally, the interaction of participants holding each one a right to invest can give rise under imperfect information to situations of deviations from the optimal timing of exercise of the investment and to herd behavior or informational cascades given that the agents take into account when deciding not only their private set of information but also the information released to the market by the decisions made by the other agents. In the present paper we develop a model that tries to capture these effects and dynamics by showing revision of conditional expectations of the agents, and with considerations regarding the degree of dispersion of information in the economy and the effect of the number of participants and their effect into their behavior.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Serie Documentos de Trabajo ; No. 362

Classification and Topics

• Classification: Wirtschaft ; Financial Economics: General ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance ; Financial Aspects of Economic Integration
• Subject: real options ; capital markets ; investment ; aggregation ; information

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dapena, José Pablo
• Event: Veröffentlichung
• (who): Universidad del Centro de Estudios Macroeconómicos de Argentina (UCEMA)
• (where): Buenos Aires
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/84239
• Last update: 10.03.2025, 11:43 AM CET