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Flexibility and Uncertainty

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  • Robert A. Jones
  • Joseph M. Ostroy

Abstract

The preserving of flexibility when faced with uncertainty is a neglected aspect of behaviour under risk. Yet it is an important factor in decisions to hold liquid assets or delay irreversible investment. This paper formalizes the notion of flexibility in a sequential decision context, and relates its value to the amount of information an agent expects to receive. A rudimentary money demand model is developed embodying these ideas, and the history of flexibility as an economic concept is traced.

Suggested Citation

  • Robert A. Jones & Joseph M. Ostroy, 1984. "Flexibility and Uncertainty," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 51(1), pages 13-32.
    • Handle: RePEc:oup:restud:v:51:y:1984:i:1:p:13-32.
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    File URL: http://hdl.handle.net/10.2307/2297702
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