When firms decide about irreversible investment, they may not have perfect confidence about their perceived probability measure describing future uncertainty. They may think other probability measures perturbed from the original one are also probable. Uncertainty characterized by not a single probability measure but a set of probability measures is called Knightian uncertainty. The effect of Knightian uncertainty on the value of irreversible investment opportunity is shown to be drastically different from that of the traditional uncertainty in the form of risk. Specifically, an increase in Knightian uncertainty decreases the value of investment opportunity while an increase in risk increases it.
内容記述
本文フィルはリンク先を参照のこと
雑誌名
Discussion paper series. CIRJE-F
巻
2002-CF-176
発行年
2002-09
書誌レコードID
AA11450569
フォーマット
application/pdf
日本十進分類法
330
出版者
日本経済国際共同センター
出版者別名
Center for International Research on the Japanese Economy
Irreversible Investment and Knichtian Uncertainty
