Industry investment in basic research assuming interdependence of benefits from appropriable and inappropriable activities
Article Abstract:
Research findings by Joglekar and Hamburg (1983, 1986) on suboptimal unaided industry allocation to research and development and the need for government intervention is tested in a new model. Joglekar and Hamburg's research assumes that an organization's benefits from investment in activities which are appropriable are independent of benefits from an industry's complete investment in basic research. However, investment theory proposes that an organization's benefits frequently are dependent on its portfolio of investments and that basic research that is not supported by investments in other areas may not generate as much benefit as expected. The model developed here assumes there is an interdependence of benefits. Results generated from the model indicate support for most of Joglekar and Hamburg's findings.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1990
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On the independence of irrelevant assets: McEntire's conjecture
Article Abstract:
Paul McEntire's theory that all concave utility functions possess the property of independence from irrelevant assets (IIA) is incorrect. For agents that are risk-averse, McEntire postulated that one asset dominates another asset if the agents invest only in the dominant asset instead of the other asset or a combination of the two assets. The utility function of the investor is considered to satisfy the IIA property if the investor does not invest in the other asset, even if other independent assets are available. McEntire demonstrated that many types of concave utility functions satisfy the IIA property, but research has indicated that a fairly large group of utility functions violates the IIA property.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1991
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Game-theoretical optimal portfolios
Article Abstract:
The expected log optimal portfolio is shown to be game theoretically optimal in single and multiple plays of the stock market for a wide variety of payoff functions. The results show that when maximizing the conditional expected log return there is no conflict between long-run performance and short-term performance.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1988
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