Sep 19, 2017

(DIVERSIFICATION ACROSS HETEROGENEOUS ACTIVITIES). CONSIDER TWO VARIABLE-INVESTMENT ACTIVITIES,…

This paper concentrates on the primary theme of (DIVERSIFICATION ACROSS HETEROGENEOUS ACTIVITIES). CONSIDER TWO VARIABLE-INVESTMENT ACTIVITIES,… in which you have to explain and evaluate its intricate aspects in detail. In addition to this, this paper has been reviewed and purchased by most of the students hence; it has been rated 4.8 points on the scale of 5 points. Besides, the price of this paper starts from £ 40. For more details and full access to the paper, please refer to the site.

(diversification across heterogeneous activities). Consider two variable-investment activities, α and β, as described in Section 3.4. The probabilities of success pH (when working) and pL (when shirking) are the same in both activities. The two activities are independent (as in Section 4.2). The two activities differ in their per-unit returns (Rα and Rβ) and private benefits (Bα and Bβ). Let, for i ∈ {α, β},

(i) Suppose that the entrepreneur agrees with the investors to focus on a single activity. Which activity will they choose? (ii) Assume now that the firm invests Iα in activity α and Iβ in activity β and that this allocation can be contracted upon with the investors. Write the incentive constraints and breakeven constraint. Show that it may be that the optimum is to invest more in activity β (Iβ > Iα) even though the entrepreneur would focus on activity α if she were forced to focus



100% Plagiarism Free & Custom Written,
Tailored to your instructions


International House, 12 Constance Street, London, United Kingdom,
E16 2DQ

UK Registered Company # 11483120


100% Pass Guarantee

Order Now

STILL NOT CONVINCED?

We've produced some samples of what you can expect from our Academic Writing Service - these are created by our writers to show you the kind of high-quality work you'll receive. Take a look for yourself!

View Our Samples

FLAT 25% OFF ON EVERY ORDER.Use "FLAT25" as your promo code during checkout