IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v17y1971i7p427-449.html
   My bibliography  Save this article

Optimal Entrepreneurial Decisions in a Completely Stochastic Environment

Author

Listed:
  • Nils H. Hakansson

    (University of California, Berkeley)

Abstract

This paper develops a normative model of the entrepreneur's decision problem in which the following elements are stochastic: the entrepreneur's preferences, his lifetime, the returns from investments, and the process obeyed by the interest rate. Furthermore, the entrepreneur's preferences are assumed to be sensitive to the opportunities facing him at each decision point as well as other environmental factors. At each decision point the entrepreneur must decide how to allocate his resources between consumption, life insurance, various investment opportunities, and lending/borrowing. His objective is postulated to be the maximization of expected utility from consumption as long as he lives and from the bequest left upon his death. Optimal decision functions are obtained in closed form for a class of utility functions; their properties are examined and compared to those of the optimal strategies of less general models.

Suggested Citation

  • Nils H. Hakansson, 1971. "Optimal Entrepreneurial Decisions in a Completely Stochastic Environment," Management Science, INFORMS, vol. 17(7), pages 427-449, March.
  • Handle: RePEc:inm:ormnsc:v:17:y:1971:i:7:p:427-449
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.17.7.427
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Lionel Martellini & Branko UroŇ°evi'{c}, 2006. "Static Mean-Variance Analysis with Uncertain Time Horizon," Management Science, INFORMS, vol. 52(6), pages 955-964, June.
    2. Mousa, A.S. & Pinheiro, D. & Pinto, A.A., 2016. "Optimal life-insurance selection and purchase within a market of several life-insurance providers," Insurance: Mathematics and Economics, Elsevier, vol. 67(C), pages 133-141.
    3. Scott A. Shane & Karl T. Ulrich, 2004. "50th Anniversary Article: Technological Innovation, Product Development, and Entrepreneurship in Management Science," Management Science, INFORMS, vol. 50(2), pages 133-144, February.
    4. Blanchet-Scalliet, Christophette & El Karoui, Nicole & Jeanblanc, Monique & Martellini, Lionel, 2008. "Optimal investment decisions when time-horizon is uncertain," Journal of Mathematical Economics, Elsevier, vol. 44(11), pages 1100-1113, December.
    5. Blanchet-Scalliet, Christophette & El Karoui, Nicole & Martellini, Lionel, 2005. "Dynamic asset pricing theory with uncertain time-horizon," Journal of Economic Dynamics and Control, Elsevier, vol. 29(10), pages 1737-1764, October.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:17:y:1971:i:7:p:427-449. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc). General contact details of provider: http://edirc.repec.org/data/inforea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.