IDEAS home Printed from https://ideas.repec.org/p/bbk/bbkefp/1505.html
   My bibliography  Save this paper

Dynamic Project Selection

Author

Listed:
  • Arina Nikandrova

    (Department of Economics, Mathematics & Statistics, Birkbeck)

  • Romans Pancs

    (University of Rochester)

Abstract

We study a normative model of an internal capital market, used by a company to choose between its two divisions’ pet projects. Each project’s value is initially unknown to all but can be dynamically learned by the corresponding division. Learning can be suspended or resumed at any time and is costly. We characterize an internal capital market that maximizes the company’s expected cash flow. This market has indicative bidding by the two divisions, followed by a spell of learning and then firm bidding, which occurs at an endogenous deadline or as soon as either division requests it.

Suggested Citation

  • Arina Nikandrova & Romans Pancs, 2015. "Dynamic Project Selection," Birkbeck Working Papers in Economics and Finance 1505, Birkbeck, Department of Economics, Mathematics & Statistics.
  • Handle: RePEc:bbk:bbkefp:1505
    as

    Download full text from publisher

    File URL: http://eprints.bbk.ac.uk/id/eprint/15274
    File Function: First version, 2015
    Download Restriction: no

    Other versions of this item:

    Citations

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


    Cited by:

    1. Olivier Gossner & Jakub Steiner & Colin Stewart, 2018. "Attention Please!," Working Papers tecipa-626, University of Toronto, Department of Economics.
    2. Yeon-Koo Che & Konrad Mierendorff, 2019. "Optimal Dynamic Allocation of Attention," American Economic Review, American Economic Association, vol. 109(8), pages 2993-3029, August.

    More about this item

    Keywords

    Internal Capital Market; Irreversible Project Selection.;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:bbk:bbkefp:1505. 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: (). General contact details of provider: http://www.ems.bbk.ac.uk/ .

    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.