New frontiers of real options: Rational life-cycle decisions under uncertainty.

摘要

This thesis explores the effects of time and uncertainty on a firm's or an individual's decision-making process.;In the first chapter, I model a strategic capital replacement game with two symmetric firms, each holding a unique capital-replacement option over an infinite horizon. I recognize that, under fixed costs of investment and time-to-build, a firm's exercise of its capital-replacement option leads to a significant temporary reallocation of the firm's revenues to its competitor. By incorporating this effect I depart from the previous literature, which has exclusively modeled the degree of "harm" to the follower revenues caused by the leader's adoption of the improved technology, and I provide a new perspective on understanding competitive behavior among firms.;The second chapter presents the first application of real options theory to labor economics. I adapt the theoretical approach of the first chapter to individual career switching decisions, stressing the ongoing uncertainty of the labor environment in which those decisions are made. Indeed, the possibility that one's labor income stream may fluctuate adversely over time, a risk known as human capital risk, is arguably the largest source of uncertainty faced by most individuals during a protracted part of their adult lives. This approach recognizes the option value of changing careers in light of disagreeable realizations in financial and labor markets, thus avoiding an irreversible commitment to a specific occupation when young.;The third chapter explores the implications of career options for financial risk-taking and portfolio selection. A cardinal insight provided by the model is that the individual's human capital is not "essentially the same as a financial asset," but it should be evaluated as a bundle of financial assets, a synthesis of rather exotic securities. In the instance of employment in a specific industry, I derive optimal portfolio policies by matching the individual's financial risk exposures to her net desired risk exposures. The two most remarkable results are the extensive fraction of financial wealth invested in own-occupation equities and the large absolute value of portfolio rebalancing over time.