Dixit (1988) observed that the mathematical construct of "regulated Brownian motion" developed by Harrison (1985) had proved useful in economic models of decision-making under uncertainty. In a recent note he provided a number of methods for calculating expected discounted payoff functions based on such processes. The purpose of this supplement is twofold: -determine to what extent the first-degree conditions reached by Dixit (his equations (12) and (13) or (12') and (13')) are simply a consequence of the definition of the expected discounted payoff, or to what extent they can be interpreted as first order conditions of some optimization problem, as has been suggested in Dumas(1988); -extend Dixit's treatment to the case where there are fixed costs of regulation as 1n Grossman-Laroque (1987).
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number
0077.
Length: Date of creation: Apr 1989 Date of revision: Handle: RePEc:nbr:nberte:0077
Note: ITI IFM Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: ().