Investment Choices: Indivisible non-Marketable Assets and Bounded Rationality

Pierpaolo Pattitoni and Marco Savioli

Working Paper series from Rimini Centre for Economic Analysis

Abstract: Several investment decisions deal with non-marketable assets. Nonmarketable assets are available only to one investor and are often indivisible. This has relevant consequences on investor investment opportunities. Adhering to a mean variance representation of the investment space and considering a non-marketable asset (divisible or not), we derive some possible investment scenarios an investor may face. Furthermore, we show how bounded rationality affects investor portfolio choices. Our results define a set of conditions under which the non-marketable asset represents a good investment and show that, under certain assumptions, the efficient frontier exhibits non-linearities and intervals of discontinuity. That allows us to classify investors who can access a non-marketable investment as either entrepreneurs, who undertake it, or clerks, who invest their entire wealth on the market.

Keywords: Portfolio Choice; Investment Decisions; Asset Indivisibility; Non-marketable Assets; Bounded Rationality (search for similar items in EconPapers)
JEL-codes: D81 G11 (search for similar items in EconPapers)
Date: 2011-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published in Economic Modelling, 28(6):2387-2394, 2011

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