We introduce a post‐entry liquidity constraint to the standard model of a firm with serially correlated profitability and an irreversible exit decision. We assume that firms with no cash holdings and negative cash flow must either exit or raise new cash at a transaction cost. This creates a...

We introduce a liquidity constraint to the standard model of a firm with stochastic cash flow and an irreversible exit decision. A firm with no cash holdings and negative cash flow is forced to exit regardless of its option value. This creates a precautionary motive for holding cash, which has a...

I examine a declining duopoly in which the firms must choose when to exit from the market. The uncertainty is modelled by letting the revenue stream follow a geometric Brownian motion. I consider the Markov-perfect equilibrium in firms' exit strategies. With a low degree of uncertainty there is...

We analyse information aggregation in a stopping game with uncertain pay-offs that are correlated across players. Players learn from their own private experiences as well as by observing the actions of other players. We give a full characterization of the symmetric mixed strategy equilibrium,...

We analyze the optimal investment strategy of a firm that can complete a project either in one stage at a single freely chosen time point or in incremental steps at distinct time points. The presence of economies of scale gives rise to the following trade-off: lumpy investment has a lower total...

We consider how efficient markets adopt technologies that reduce dependence on volatile factors such as oil. We find a relationship between volatility and technology overlap: new technology entry rate exceeds old technology exit rate under sufficient uncertainty. From this follows that efficient...

We analyse information aggregation in a stopping game with uncertain pay-offs that are correlated across players. Players learn from their own private experiences as well as by observing the actions of other players. We give a full characterization of the symmetric mixed strategy equilibrium,...