We focus on firms' risk-taking for customers and investigate how this type of risk-taking is influenced by "performance relative to aspiration" (PRA). Specifically, we examine the PRA and project-financing (PF) loan activities of all 79 savings banks in South Korea from 2013 to 2021. Contrary to...

This paper considers the consequences of a two-sector vertically-integrated model of firms producing output using firm-specific capital with a second sector producing firm-specific capital by adapting raw capital purchased in the market. Analysts rarely observe each sector separately....

We study the optimal output of a competitive firm under price uncertainty. Instead of assuming a risk-averse firm, we assume that the firm is regret-averse. We find that optimal output under uncertainty would be lower than under certainty. We also prove that optimal output could increase or...

This paper examines the interplay between the real and financial decisions of the competitive firm under output price uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm always chooses its optimal debt-equity ratio to...

We study optimal promotion decisions of hierarchical firms, with one junior and one senior managerial position, which interact in a search and matching labour market. Workers acquire experience over time while being employed in a junior position and the firm has to determine the experience level...

In this paper we analyse a dynamic model of investment under uncertainty in a duopoly, in which each firm has an option to switch from the present market to a new market. We construct a subgame perfect equilibrium in mixed strategies and show that both preemption and attrition can occur along...

We introduce a notion of subgames for stochastic timing games and the related notion of subgame-perfect equilibrium in possibly mixed strategies. While a good notion of subgame-perfect equilibrium for continuous-time games is not available in general, we argue that our model is the appropriate...

We construct subgame-perfect equilibria with mixed strategies for symmetric stochastic timing games with arbitrary strategic incentives. The strategies are qualitatively different for local first- or second-mover advantages, which we analyse in turn. When there is a local second-mover advantage,...

We develop a zero beta industry model of growth options to explain the conflicting empirical findings on the relation between stock returns and idiosyncratic return volatility at the firm level. By allowing for the volatility of the underlying idiosyncratic choice variables to exhibit...

We present a model of firm investment under uncertainty and partial irreversibility in which uncertainty is represented by a jump diffusion. This allows to represent both the continuous Gaussian volatility and the discontinuous uncertainty related to information arrival, sudden changes and large...