Recreating Banking Networks under Decreasing Fixed Costs

Portfolio Optimization Under Fixed Transaction Costs

Optimal Portfolio Selection under Vanishing Fixed Transaction Costs

In this paper, asymptotic results in a long-term growth rate portfolio optimization model under both fixed and proportional transaction costs are obtained. More precisely, the convergence of the model when the fixed costs tend to zero is investigated. A suitable limit model with purely proportional costs is introduced and the convergence of optimal boundaries, asymptotic growth rates, and optim...

Decreasing aversion under ambiguity

Under which condition does the set of desirable uncertain prospects expand when wealth increases? We show that the decreasing concavity (DC) of the utility function  is necessary and sufficient in the −maxmin expected utility model. In the smooth ambiguity aversion model with the ambiguity valuation function , the DC of  and of ◦ is necessary and sufficient. An alternative definition of d...

Estimating switching costs: the case of banking

We present an empirical model of firm behavior in the presence of switching costs. Customers’ transition probabilities, embedded in firms’ value maximization, are used in a multiperiod model to derive estimable equations of a first-order condition, market share (demand), and supply equations. The novelty of the model is in its ability to extract information on both the magnitude and significanc...

Fixed and Sunk Costs Revisited

The authors attempt to clarify the concepts of, and the link between, fixed costs and sunk costs. They argue that the root for possible confusion between fixed costs and sunk costs is the inconsistency in defining the term fixed costs. They define fixed costs uniformly as the costs that are independent of the level of output and suggest that instructors refer to the part of fixed costs that are...