Economic Theory

, Volume 1, Issue 1, pp 13–30 | Cite as

Linear models of economic survival under production uncertainty

  • Mukul Majumdar
  • Roy Radner
Research Articles
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Summary

In this paper we consider the situation of an investor facing uncertainty, and whose objective is to survive. First we characterize the probability of survival of a passive agent who does not attempt to influence the evolution of the environment. Secondly, we look at an active agent who chooses investment opportunities affecting his fortune and who attempts to maximize the probability of survival. It is shown that, in some cases, the optimal investment policy will exhibit a risk-loving behavior whenever his fortune is below a critical level.

Keywords

Linear Model Economic Theory Active Agent Critical Level Investment Opportunity 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
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Copyright information

© Springer-Verlag 1991

Authors and Affiliations

  • Mukul Majumdar
    • 1
  • Roy Radner
    • 2
    • 3
  1. 1.Department of EconomicsCornell UniversityIthacaUSA
  2. 2.Department of EconomicsNew York UniversityMurray HillUSA
  3. 3.A.T. & T. Bell LaboratoriesMurray HillUSA

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