Resource Allocation When Projects Have Ranges of Increasing Returns

Catherine Bobtcheff, Christian Gollier (christian.gollier@tse-fr.eu) and Richard Zeckhauser

Working Paper Series from Harvard University, John F. Kennedy School of Government

Abstract: 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.

JEL-codes: C60 (search for similar items in EconPapers)
Date: 2008-04
New Economics Papers: this item is included in nep-ppm
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Related works:
Journal Article: Resource allocation when projects have ranges of increasing returns (2008)
Journal Article: Resource allocations when projects have ranges of increasing returns (2008)
Working Paper: Resource Allocation when Projects Have Ranges of Increasing Returns (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:harjfk:rwp08-024

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