Econometrica: Sep 2006, Volume 74, Issue 5
Hector Chade, Lones SmithWe introduce and solve a new class of “downward‐recursive” static portfolio choice problems. An individual simultaneously chooses among ranked stochastic options, and each choice is costly. In the motivational application, just one may be exercised from those that succeed. This often emerges in practice, such as when a student applies to many colleges or when a firm simultaneously tries several technologies.
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