Showing 1 - 10 of 126
We present a real-options model of takeovers and disinvestment in declining industries. As product demand declines, a first-best closure level is reached, where overall value is maximized by shutting down the .rm and releasing its capital to investors. Absent takeovers, managers of unlevered...
Persistent link: https://www.econbiz.de/10012767602
A market-size-only theory of industrialization cannot explain why England developed nearly two centuries before China. One shortcoming of such a theory is its exclusive focus on producers. We show that once we incorporate the incentives of factor suppliers' organizations such as craft guilds,...
Persistent link: https://www.econbiz.de/10012916601
The views expressed herein are those of the authors and do not necessarily represent the views of the Federal Reserve Bank of Richmond or the Federal Reserve System. We thank Eric LaRose and Sara Ho for outstanding research assistance.Using U.S. NETS data, we present evidence that the positive...
Persistent link: https://www.econbiz.de/10012910661
This paper investigates competition between jurisdictions in the context of cross-border shopping for state lottery tickets. We first develop a simple theoretical model in which consumers choose between state lotteries and face a trade-off between travel costs and the price of a fair gamble,...
Persistent link: https://www.econbiz.de/10013224412
We consider a model with several regions whose technological ability and factor endowments are identical and in which transport costs between regions are non-negligible. Nonetheless, certain goods are sometimes produced by multiple firms all of which are located in the same region. These goods...
Persistent link: https://www.econbiz.de/10013230988
In markets where spatial competition is important, many models predict that average prices are lower in denser markets (i.e., those with more producers per unit area). Homogeneous-producer models attribute this effect solely to lower optimal markups. However, when producers instead differ in...
Persistent link: https://www.econbiz.de/10012767333
This article develops and implements a Real Option approach to value renewable natural resources in the case of Marine Fisheries. The model includes two sources of uncertainty: the resource biomass and the price of fish, and it can be used by fisheries to optimally adapt their harvesting...
Persistent link: https://www.econbiz.de/10012909855
We study when and why firms exercise real options. Using detailed project-level investment data, we find that the likelihood that a firm exercises a real option is strongly related to peer exercise behavior. Peer exercise decisions are as important in explaining exercise behavior as variables...
Persistent link: https://www.econbiz.de/10012891314
The real options framework has been used extensively to analyze the timing of investment under uncertainty. While standard real options models assume that agents possess a constant rate of time preference, there is substantial evidence that agents are very impatient about choices in the...
Persistent link: https://www.econbiz.de/10013226097
Sunk costs play a central role in antitrust economics, but are often misunderstood and mismeasured. I will try to clarify some of the conceptual and empirical issues related to sunk costs, and explain their implications for antitrust analysis. I will be particularly concerned with the role of...
Persistent link: https://www.econbiz.de/10013237049