We propose a tractable model of dynamic investment, division sales (spinoffs), financing, and risk management for a multi-division firm that faces costly external finance. The model highlights the importance of considering the intertwined nature of the different policies. Our main results are as...

We propose a tractable model of dynamic investment, spinoffs, financing, and risk management for a multi-division firm facing costly external finance. Our main results are: (1) within-firm resource allocation is based not only on the divisions’ productivity—as in “winner picking”...

We propose a tractable model of dynamic investment, division sales (spinoffs), financing, and risk management for a multi-division firm that faces costly external finance. The model highlights the importance of considering the intertwined nature of the different policies. Our main results are as...

Many business opportunities feature second-mover advantages as there are often positive spillovers and externalities from early entrants to followers. We develop a tractable stochastic duopoly entry game with a second-mover advantage. We show that firms engage in a war-of-attrition game with the...

Many business opportunities feature second-mover advantages as there are often positive spillovers and externalities from early entrants to followers. We develop a tractable stochastic duopoly entry game with a second-mover advantage. We show that firms engage in a war-of-attrition game with the...

We develop a model where a realization-utility investor (Barberis and Xiong, 2009, 2012; Ingersoll and Jin, 2013) optimally targets her liquid-illiquid wealth ratio at a constant w∗. By saving in the risk-free asset (w∗ 0), she makes smaller bets in the illiquid asset and realizes gains/losses...

We consider a long-term portfolio choice problem with two illiquid and correlated assets and formulate it as an eigenvalue problem in the form of a variational inequality. The eigenvalue is associated with the portfolio’s optimal long-term growth rate, and the free boundaries implied by the...