publication . Preprint . Article . 2005

Buridan's Ass and a Menu of Options

Svetlana I. Boyarchenko;
Open Access
  • Published: 31 Jan 2005
Abstract
The goal of the paper is to study how a menu of options affects decisions of a rational agent facing uncertainty over future payoff streams. Using the real options approach, we demonstrate that multiple options not only increase the barrier which the underlying stochastic variable has to reach in order investment became optimal, but cause the investor to be inactive even when the cost of investment is vanishing. As a technical contribution, the paper suggests a robust method of solution of a two-point optimal stopping problem.
Subjects
free text keywords: Real options, procrastination, choice between two projects, jel:D81, jel:C61, jel:G31, Stochastic game, Rational agent, Buridan's ass, Procrastination, media_common.quotation_subject, media_common, Economics, Optimal stopping, Microeconomics, Random variable
Related Organizations

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publication . Preprint . Article . 2005

Buridan's Ass and a Menu of Options

Svetlana I. Boyarchenko;