The Effects of Uncertainty on Investment under Risk Neutrality with Endogenous Information
Bibliographic Data
| ID | 10180935 |
|---|---|
| Authors | Alex Cukierman (0000-0002-8645-4614, corresponding author) |
| Year | 1980 |
| Volume | 88 |
| Issue | 3 |
| Pages | 462-475 |
| Publication date | 1980-06-01 |
| Peer Reviewed | Yes |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/260880 |
| OpenAlex | W2086596348 |
| Language | EN |
| Citations received | 15 |
| References cited | 4 |
Using a Bayesian framework, this paper considers a risk-neutral firm which has to pick an investment project out of many that are available. It is shown that, if the firm is allowed to collect information, it will usually devote some time to information gathering before choosing. The main result is that, when uncertainty increases, the firm finds it profitable to delay investment decisions even further in order to collect more information. Thus increased uncertainty decreases the current level of investment even under risk neutrality. Another implication is that increased uncertainties cause an increase in the demand for liquid assets
Actuarial science · Business · Economics · Investment (military · Investment Decisions · Microeconomics · Neutrality · Order (exchange · Production (economics · Risk neutral · Capital Investment and Risk Analysis · Climate Change Policy and Economics · Economic theories and models · Finance
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| Unique citing works | 15 |
|---|---|
| Citations per year | 0,38 |
| Citation span | 1987 - 2023 (37) |
| Citation velocity | historical |
| Highly cited | No |
| Citation types | Neutral: 14 |