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Dynamic project selection

Arina Nikandrova () and Romans Pancs
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Arina Nikandrova: Department of Economics, Mathematics and Statistics, Birkbeck, University of London

Theoretical Economics, 2018, vol. 13, issue 1

Abstract: We study a normative model of an internal capital market that a company uses to choose between its two divisions’ projects. Each project's value is initially unknown to all, but can be dynamically learned by the corresponding division. Learning can be suspended or resumed at any time and is costly. We characterize an internal capital market that maximizes the company’s expected cash flow.

Keywords: Internal capital market; irreversible project selection (search for similar items in EconPapers)
JEL-codes: D82 D83 G31 G32 (search for similar items in EconPapers)
Date: 2018-01-31
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