Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/84239
Authors: 
Dapena, José Pablo
Year of Publication: 
2007
Series/Report no.: 
Serie Documentos de Trabajo, Universidad del CEMA: Área: economía y finanzas 362
Abstract: 
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.
Subjects: 
real options
capital markets
investment
aggregation
information
JEL: 
G00
O16
F36
Document Type: 
Working Paper

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