Flexibility and Uncertainty
- 1 January 1984
- journal article
- Published by Oxford University Press (OUP) in The Review of Economic Studies
- Vol. 51 (1) , 13-32
- https://doi.org/10.2307/2297702
Abstract
The preserving of flexibility when faced with uncertainty is a neglected aspect of behaviour under risk. Yet it is an important factor in decisions to hold liquid assets or delay irreversible investment. This paper formalizes the notion of flexibility in a sequential decision context, and relates its value to the amount of information an agent expects to receive. A rudimentary money demand model is developed embodying these ideas, and the history of flexibility as an economic concept is traced.Keywords
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