This paper analyses optimal irreversible investment policy when profits are subject to a multiplicative geometric Brownian motion shock. The marginal product of capital is increasing initially and decreasing thereafter. In the latter range, optimal policy is familiar: capacity is added gradually...

Microeconomics - individuals' choices of where to live and work, how much to save, what to buy, and firms' decisions about location, hiring, firing, and investment - involves issues that concern us on a daily basis. But when people think about economics, they tend to place importance on the...

The paper argues that to achieve compliance of firms with regulations such as product quality or environmental or health standards it is better to have industries with a few large corporations than numerous small firms. A model is constructed to show that limited liability constraints bind more...

The author suggests methods for teaching game theory at an introductory level, using interactive games to be played in the classroom or in computer clusters, clips from movies to be screened and discussed, and excerpts from novels and historical books to be read and discussed.

Many recent stochastic dynamic models in economics and finance are based on the theory of Brownian motion and its control or regulation. A heuristic exposition of this theory is presented with emphasis given to Itô's Lemma, the calculation of expected values and the derivation of Smooth Pasting...

This paper analyses optimal irreversible investment policy when profits are subject to a multiplicative geometric Brownian motion shock. The marginal product of capital is increasing initially and decreasing thereafter. In the latter range, optimal policy is familiar: capacity is added gradually...

The main focus of this review is on international trade and foreign direct investment when the institutions that provide the security of property rights and enforcement of contracts are imperfect. Some issues of national security related to poor governance of international transactions are also...

We develop a formula for the market value of debt when the borrower's repayment capacity varies stochastically and shortfalls are rolled over. The value of a marginal dollar of nominal claim is an S-shaped function of the ratio of the repayment capacity to the amount of nominal debt. Shifts of...

When there are collection lags in the tax system, inflation reduces real revenues. This is often offered as an argument for less reliance on the inflation tax. But the optimal rates of other taxes should also be reconsidered in the light of collection lags. When this is done, the focus shifts...