The types of investments a ï¬rm undertakes will depend in part on what it expects the outcome of those investments to reveal about its skills, capabilities, and assets (i.e., its resources). We predict that a ï¬rm will specialize when young, then experiment in a new line of business for some...

This paper offers a novel explanation for why some firms prefer to pay dividends rather than repurchase shares. It is well-known that institutional investors are relatively less taxed than individual investors, and that this induces "dividend clientele" effects. We argue that these clientele...

We examine the welfare effects of costly information acquistion in a version of the Grossman-Stiglitz (1980) exchange economy in which all traders are fully rational. We find, as emphasized by Hirschleifer, that information gathering leads the suboptimal risk sharing. Furthermore, information...