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.
|Date of creation:||Apr 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.ksg.harvard.edu/research/working_papers/index.htm
More information through EDIRC
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.:
- Ginsberg, William, 1974. "The multiplant firm with increasing returns to scale," Journal of Economic Theory, Elsevier, vol. 9(3), pages 283-292, November.
- Heal, G.M., 1997. "The Economics of Increasing Returns," Papers 97-20, Columbia - Graduate School of Business.
- 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.
- Brown, Donald J & Heal, Geoffrey, 1979.
"Equity, Efficiency, and Increasing Returns,"
Review of Economic Studies,
Wiley Blackwell, vol. 46(4), pages 571-85, October.
- M. L. Weitzman, 1978.
"Optimal Search for the Best Alternative,"
214, Massachusetts Institute of Technology (MIT), Department of Economics.
- Scherer, F. M., 1983. "The propensity to patent," International Journal of Industrial Organization, Elsevier, vol. 1(1), pages 107-128, March.
- Aoki, Masahiko, 1971. "An Investment Planning Process for an Economy with Increasing Returns," Review of Economic Studies, Wiley Blackwell, vol. 38(115), pages 273-80, July.
- Cremer, Jacques, 1977. "A Quantity -Quantity Algorithm for Planning under Increasing Returns to Scale," Econometrica, Econometric Society, vol. 45(6), pages 1339-48, September.
- Rader, Trout, 1970. "Resource Allocation with Increasing Returns to Scale," American Economic Review, American Economic Association, vol. 60(5), pages 814-25, December.
When requesting a correction, please mention this item's handle: RePEc:ecl:harjfk:rwp08-024. 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: ()
If references are entirely missing, you can add them using this form.