Resource allocation when projects have ranges of increasing returns
A fixed budget must be allocated to a finite number of different projects with uncertain outputs. The expected marginal productivity of capital in a project first increases then decreases with the amount of capital invested. Such behavior is common when output is a probability (of escaping infection, succeeding with an R&D project…). When the total budget is below some threshold, it is invested in a single project. Above this cutoff, the share invested in a project can be discontinuous and non-monotone in the total budget. Above an upper cutoff, all projects receive more capital as the budget increases.
(This abstract was borrowed from another version of this item.)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rader, Trout, 1970. "Resource Allocation with Increasing Returns to Scale," American Economic Review, American Economic Association, vol. 60(5), pages 814-25, December.
- Heal, G.M., 1997. "The Economics of Increasing Returns," Papers 97-20, Columbia - Graduate School of Business.
- Weitzman, Martin L, 1979.
"Optimal Search for the Best Alternative,"
Econometric Society, vol. 47(3), pages 641-54, May.
- Scherer, F. M., 1983. "The propensity to patent," International Journal of Industrial Organization, Elsevier, vol. 1(1), pages 107-128, March.
- Masahiko Aoki, 2013.
"An Investment Planning Process for an Economy with Increasing Returns,"
in: Comparative Institutional Analysis, chapter 4, pages 37-48
Edward Elgar Publishing.
- M. Aoki, 1971. "An Investment Planning Process for an Economy with Increasing Returns," Review of Economic Studies, Oxford University Press, vol. 38(3), pages 273-280.
- M. L. Weitzman & K. Roberts, 1979.
"Funding Criteria for Research, Development and Exploration Projects,"
234, Massachusetts Institute of Technology (MIT), Department of Economics.
- Roberts, Kevin & Weitzman, Martin L, 1981. "Funding Criteria for Research, Development, and Exploration Projects," Econometrica, Econometric Society, vol. 49(5), pages 1261-88, September.
- Cremer, Jacques, 1977. "A Quantity -Quantity Algorithm for Planning under Increasing Returns to Scale," Econometrica, Econometric Society, vol. 45(6), pages 1339-48, September.
- Ginsberg, William, 1974. "The multiplant firm with increasing returns to scale," Journal of Economic Theory, Elsevier, vol. 9(3), pages 283-292, November.
- Donald J. Brown & Geoffrey Heal, 1979.
"Equity, Efficiency and Increasing Returns,"
Review of Economic Studies,
Oxford University Press, vol. 46(4), pages 571-585.
When requesting a correction, please mention this item's handle: RePEc:kap:jrisku:v:37:y:2008:i:1:p:1-33. 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: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.