Bayesian Learning and the Optimal Investment Decision of the Firm
AbstractThis paper is about learning. It illustrates how in a two period allocation problem with uncertainty in each period, an economic agent's decisions are influenced by the knowledge that he is able to learn about the uncertainty. The time periods are linked through the learning process of the economic agent. The problem to be analysed is that faced by a firm deciding whether or not to invest in a new technology or production process, whose returns are not known with certainty. Because of the two period environment, the firm is able to experiment with the new process in the first period, and observe the results before making another investment decision at the beginning of the second. Goven the opportunity for learning, how will this affect the decision of the firm in the first period?
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Bibliographic InfoArticle provided by Royal Economic Society in its journal The Economic Journal.
Volume (Year): 93 (1983)
Issue (Month): 369a (Supplement March)
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Other versions of this item:
- Tonks, Ian, 1981. "Bayesian Learning and the Optimal Investment Decision of the Firm," The Warwick Economics Research Paper Series (TWERPS) 192, University of Warwick, Department of Economics.
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- Alexander Zimper & Alexander Ludwig, 2007.
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07155, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
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- Alexander Ludwig & Alexander Zimper, 2007. "A Parsimonious Model of Subjective Life Expectancy," MEA discussion paper series 07154, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
- Alexander Ludwig & Alexander Zimper, 2008. "A parsimonious model of subjective life expectancy," Working Papers 74, Economic Research Southern Africa.
- Ludwig, Alexander & Zimper, Alexander, 2007. "A Parsimonious Model of Subjective Life Expectancy," Sonderforschungsbereich 504 Publications 07-65, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
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- Ludwig, Alexander & Zimper, Alexander, 2014. "Biased Bayesian learning with an application to the risk-free rate puzzle," Journal of Economic Dynamics and Control, Elsevier, vol. 39(C), pages 79-97.
- Alexander Ludwig & Alexander Zimper, 2013. "Biased Bayesian learning with an application to the risk-free rate puzzle," Working Papers 201366, University of Pretoria, Department of Economics.
- Alexander Zimper & Alexander Ludwig, 2008.
"On attitude polarization under Bayesian learning with non-additive beliefs,"
104, Economic Research Southern Africa.
- Alexander Zimper & Alexander Ludwig, 2009. "On attitude polarization under Bayesian learning with non-additive beliefs," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 181-212, October.
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