We examine operating and investment decisions in a duopolistic industry in which an initial investment in research yields an immediate tax benefit for one firm, but creates a net operating loss carryover for the other firm. We show that the conventional wisdom that suggests that the first firm...

Insurance markets are subject to transaction costs and constraints on portfolio holdings. Therefore, unlike the frictionless asset markets case, viability is not equivalent to absence of arbitrage possibilities. We use the concept of unbounded arbitrage to characterize viable prices on a...