Irreversible investment and Knightian uncertainty

Kiyohiko G. Nishimura, Hiroyuki Ozaki

研究成果: Article査読

88 被引用数 (Scopus)

抄録

When firms make a decision about irreversible investment, they may not have complete confidence about their perceived probability measure describing future uncertainty. They may think other probability measures perturbed from the original one are also possible. Such uncertainty, characterized by not a single probability measure but a set of probability measures, is called "Knightian uncertainty." The effect of Knightian uncertainty on the value of irreversible investment opportunity is shown to be drastically different from that of traditional uncertainty in the form of risk. Specifically, an increase in Knightian uncertainty decreases the value of investment opportunity while an increase in risk increases it.

本文言語English
ページ(範囲)668-694
ページ数27
ジャーナルJournal of Economic Theory
136
1
DOI
出版ステータスPublished - 2007 9

ASJC Scopus subject areas

  • 経済学、計量経済学

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